We kicked off the day with Housing Starts & Permits at 7:30 A.M. Central, Capacity Utilization and Industrial Production at 8:15 A.M. followed by API Energy Stocks 3:30 P.M. Goldman Sachs beat the street in earnings and we have plenty more earnings expected today. European stocks were solid and economic data out of China was mixed. Crazy weather continues to have traders wondering how long of a delay we will have in plantings and when the market takes notice and begins to build premium with global stocks at a low. In the overnight electronic session the May Corn is currently trading at 383 ¾ which is 1 ½ of a cent higher. The trading range has been 384 ½ to 382.
On the Ethanol front it is rollover time to the June contract. Although the May contract was more active with 14 contracts changing hands. Open Interest did climb in yesterday’s trading session to 888 contracts. In the overnight electronic session the May contract is currently trading at 1.477 which is .004 higher. The trading range has been 1.477 to 1.463. The market is currently showing 1 bid @ 1.475 and 1 offer @ 1.478.
On the Crude Oil front the market is holding support and the May contract is currently trading at 6622 which is unchanged. The trading range has been 6675 to 6607. Later today we have the weekly API Energy Stocks and whisper numbers are calling for draws.
On the Natural Gas front the May contract is currently trading at 2.737 which is 1 ½ of a cent lower. The trading range has been 2.748 to 2.711. Cooler than normal temperatures are forecasted to stick around for a while which could lend support to this market.
— Daniel Flynn
The Energy Report: Time to buy the rumor again
Buy the rumor and sell the fact. Many traders thought the run-up on oil was based only on the potential of an attack on Syria and fears that it spins out of control. Yet, the run-up in oil has been about a lot more than just Syria, but about falling supply, rising demand and other geo-political risk factors. Oil is already shaking off the “sell the fact” trade after the successful attack on Syria’s alleged chemical weapons sites and now focuses on other supply risks and generally strong global demand. Oil is finding support on private reports that we may see a drop in U.S. crude supply led by a drop in the NYMEX delivery hub of Cushing Oklahoma.
Private forecaster Genscape reported that crude supply in Cushing Oklahoma fell by 1.23 million barrels. Matthew Epstein. of COWEN Research also reported a substantial draw at 769,663 Barrels. This reverses the recent trend of builds as this increases the odds of a large drop in overall U.S. crude supply.
We also must consider the impact of the total collapse of the Venezuelan oil industry. “The Independent” reported that “Despite having the greatest oil reserves in the world, Venezuela’s government is being forced to spend millions of dollars a day importing crude to prop up its ailing industry.”
They write that “the speed of decline in production has been vertiginous, with output falling by 100,000 barrels a day in February, according to Bloomberg. The Central University of Venezuela says production is reaching its lowest point in 70 years. Most of the enormous oil reserves Venezuela has access to – almost 25 per cent of all the oil controlled by the world’s biggest producers – is heavy crude and needs to be diluted with lighter oil to become a commercially viable product.”
Reuters is reporting that under military rule, Venezuela oil workers quit in a stampede. The leader Major General Manuel Quevedo, last month toured a joint venture with U.S. major Chevron, but now is speeding the total breakdown of the Venezuelan oil industry
Reuters reports that thousands of oil workers are fleeing the state-run oil firm under the watch of its new military commander, who has quickly alienated the firm’s embattled upper echelon and its rank-and-file, according to union leaders, a half-dozen current PDVSA workers, a dozen former PDVSA workers and a half-dozen executives at foreign companies operating in Venezuela. Some PDVSA offices now have lines outside with dozens of workers waiting to quit. In at least one administrative office in Zulia state, human resources staff quit processing out the quitters, hanging a sign, “we do not accept resignations,” an oil worker there told Reuters. Official workforce statistics have become a closely guarded secret, but a dozen sources told Reuters that many thousands of workers had quit so far this year – an acceleration of an already troubling outflow last year.
Oil is getting signs of strong demand even as gasoline demand fell below year ago levels last week for the first time. Rising pump prices and cold weather hurt gas demand. Wacky weather is supporting Natural gas because of the cold and storms in the Ivory coast are causing Cocoa to skyrocket. Some parts of the country are seeing the coldest temperatures ever and some have to go back 60 to 100 years to see weather this cold. And now we have to get ready for Hurricane Season?
WeatherBell Analytics is putting out its much anticipated Hurricane Outlook. They say that their seasonal hurricane outlook indicates that activity in the Atlantic Basin will be near normal in 2018. Unlike last year when we plainly had the U.S. in the cross-hairs, this year it looks like the U.S. will be on the western edge of the highest activity. So we got that going for us! They will keep us informed all season!
— Phil Flynn
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