Slow day in the Grain complex as we do not expect any new happenings before Friday’s Crop Production, Grain Stocks, USDA Supply/Demand and Winter Wheat Seedings. A Thomson Reuters poll of analyst Corn end-stocks predict the USDA number will come in averaging 2.431 billion bushels with high estimate of 2.550 bb and the low 2.263 bb The December USDA came in at 2.550 bb. Analysts own estimates averaging Corn end-stocks average of 2.407 bb with the high at 2.550 bb and the low 2.295 bb. In the overnight electronic session the March Corn is currently trading at 248 ¼ which is 1 cent higher. The trading range has been 348 ½ to 347 ¼.
On the Ethanol front the February contract is currently trading at 1.324 which is /019 higher in the overnight session. The trading range has been 1.328 to 1.323 with estimated volume at 17 contracts and Open Interest at 1,549 contracts. The market is currently showing 1 bid@ 1.315 and 1 offer @ 1.322.
On the Crude Oil front we were very active in the overnight electronic session. We have the weekly API number today and whispers continue to talk further draws. Ideally in today’s trading session we would like to see a close above $62 a barrel. The February contract is currently trading at 6207 which is 34 points higher. The trading range has been 6256 to 6180. I do anticipate further draws and the possibility of sanctions on Iran could further stir the geo-political pot.
On the Natural Gas front the market is trading higher with the February contract currently trading at 2.900 which is 6 ½ cents higher in the overnight electronic session. The trading range has been 2.924 to 2.828. I been burned before and really want to backpedal when recommending to buy with weather forecasts continually changing and producers happy to let loose on product above $3.
— Dan Flynn
The Energy Report: Oil price rise
WTI crude prices pulled back from a critical technical level after coming within a couple of ticks of the 6258-high hit in May of 2015. Back then oil topped before a collapse in price as three bearish factors caused oil to fall.
The first was worries about the future of the European Union. Fears that a Greece exit vote would destroy the EU caused real worries. Prior to the Grexit vote Europe had shown signs of growth. Yet, that vote drove Europe back into a recession based on fear and that was the first factor that led to a sell off. Greece of course voted to leave the EU in July of 2015, only to say that the vote was to stay after the Greek banks were emptied out.
Then in July of 2015 after the market tried to put the Grexit vote in perspective the Obama administration and 5 world powers agreed to lift sanctions on Iran in exchange for Iranian limits on its nuclear program. This move, oil traders thought, would just add to a global oil glut and unless demand was strong would cause tankers of oil to flood the market place.
Then demand fears set in. August of 2015 China devalued the yuan in a move that caused an uproar in global markets. The move zapped confidence and caused global stock markets to get hit hard leading to a crisis in confidence for oil traders feared that the Chinese oil eating dragon would stop eating. That drove oil to the $26 a barrel handle, a price level not even seen in the aftermath of the great recession. That lead to a weak end to stocks in 2015 and 2016 started with the worst start to a global stock market in history. That caused oil to hit the $26-barrel area again. That price drop caused fear and pain. We heard oil would be lower for longer. That oil would go down to $10 a barrel and shale oil producers would keep producing at any price. Oil was going to $10 a barrel and the price of oil might never rally again.
We then saw massive CapX cuts that totaled over a trillion dollars. Projects canceled. But for what?
The EU is still here and thriving, China oil demand is at or near a record high. Iran’s oil has been absorbed and the predictions of tankers of supply flooding the market never came to pass. In fact, it is possible that Iran may be hit with sanctions again.
The price plunge also forced Saudi Arabia and OPEC to change tactics and end the production war with the battered and beaten shale sector. Despite the skeptics, OPEC and Non-OPEC compliance has been at a record high. They are not in a hurry to raise output. Reuters reported that OPEC is monitoring unrest in Iran as well as Venezuela’s economic crisis, but the group will only boost output if there are significant and sustained production disruptions from those countries.
Fast forward to today. U.S. oil supply has been plunging at a record rate and should fall again for the 8th week in a row. U.S. oil demand is on a tear, and we are seeing record refining demand and record exports. European oil demand is soaring as well as demand in all the major economies around the globe.
We will get the API today! We predict bullish draws in crude and distillate. While we are getting close to the 63% retracement, we still maintain our long term bullish outlook. Gasoline demand next year will be strong as the U.S. will buy a record number of new cars. Palladium, a component in catalytic convertors hit a record $1,111.4 yesterday.
Coin Desk reports that Bitcoin remains on the defensive, despite yesterday’s sharp recovery from $14,000 levels. Data source OnChainFX indicates the world’s largest cryptocurrency by market capitalization has depreciated by 4.54 percent in the last 24 hours. As of writing, CoinDesk’s Bitcoin Price Index is at $14,750 levels.
The BPI fell to a low of $13,957.19 at 15:14 UTC yesterday, reportedly due to a sell-off triggered by CoinMarketCap’s unannounced decision to exclude three Korean exchanges from their averages. However, bitcoin (BTC) was already on the back foot, possibly due to fears of China crackdown on the bitcoin mining industry in the country.
The BPI’s failure to hold above $15,000 today only underscores the bearish undertone in BTC. Further, the technical charts indicate BTC is still not completely out of the woods.
— Phil Flynn
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