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Trader's Corner 2006

Discussions about the economic and financial ramifications of PEAK OIL
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Where will the price of WTIC oil be on December 29, 2006?

Less than $50
3
No votes
Around $55
4
No votes
Around $60
7
No votes
Around $65
15
No votes
Around $70
58
No votes
More than $80
101
No votes
 
Total votes : 188

Re: Trader's Corner 2006

Unread postby mrobert » Mon 14 Aug 2006, 18:01:15

$this->bbcode_second_pass_quote('drew', '
')Trading sure is fun!
Drew


I know :) Half my car was paid with it :)
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Re: Trader's Corner 2006

Unread postby drew » Mon 14 Aug 2006, 20:16:21

I wish I started earlier, then I could buy things too. Right now I am just trying to grow my portfolio. I am a long way from retiring, or having enough to retire on. Still, buying a car with one's earnings (winnings) sounds nice. I read a Globe article about some lucky bloke in Calgary whose Beemer' plate read THX CNQ; kinda sounds like you a bit doesn't it?

Drew
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Re: Trader's Corner 2006

Unread postby cube » Mon 14 Aug 2006, 20:38:00

$this->bbcode_second_pass_quote('MrBill', '.')..Basically, some analysts feel that Isreal may be looking at a face saving retreat from the border areas inside Lebanon, as they may not be able to make a decisive win over Hizbollah, who are still lobbing rockets at them, and they are not keen to leave more troops behind to secure the area. Therefore, a blue helmet troup may allow them to withdraw under grace. That is one opinion in any case.
...
hmmm strange. I always thought Israel had the upper hand.
Then again who would win in a long drawn out war?
1) The nation with superior weapons that can enjoy a kill ratio of 10 to 1?
2) An opponent who can accept 10 times the casualties?
8)
Anywas back to trading. I think the action today with corn was very "interesting". Was today a reversal point???
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Re: Trader's Corner 2006

Unread postby MrBill » Tue 15 Aug 2006, 02:38:37

$this->bbcode_second_pass_quote('cube', '')$this->bbcode_second_pass_quote('MrBill', '.')..Basically, some analysts feel that Isreal may be looking at a face saving retreat from the border areas inside Lebanon, as they may not be able to make a decisive win over Hizbollah, who are still lobbing rockets at them, and they are not keen to leave more troops behind to secure the area. Therefore, a blue helmet troup may allow them to withdraw under grace. That is one opinion in any case.
...
hmmm strange. I always thought Israel had the upper hand.
Then again who would win in a long drawn out war?
1) The nation with superior weapons that can enjoy a kill ratio of 10 to 1?
2) An opponent who can accept 10 times the casualties?
8)
Anywas back to trading. I think the action today with corn was very "interesting". Was today a reversal point???


Assymetrical warfare. It is easier to win battles than enforce the peace. Essentially everytime they retreat they leave a vacuum that sucks insurgents in close to their border. They need a buffer and my guess people are naive enough to think Hizbollah will respect the Blue Helmets, not that they ever have before, but there you go!

Looking at the COTS weekly charts, corn has done a nice 5 wave move up from the $1.80 area to $2.70 and now looks like it is in the C leg of the A.B.C correction? $2.25 is the 50% retracement as the 38.2% retracement already broke. I guess the hedge funds are having less success pushing the commodities around than nice buy & hold investments like base & precious metals and crude oil?

With the exception of soybean oil, which is strong, is no one here surprised at the weakness in the soybean complex? I admit I have not been watching the softs, but I thought the big story was bio-diesel as an alternate source of demand for soybeans, and therefore thought (incorrectly it seems) that they would have been better supported by high gasoline prices? Never assume....

Well, crude prices continue to rachet lower. No significant rallies, yet, so it looks more like a case of looking for levels to sell rather than buying the dips until further notice. Today we'll get the first glimpse of estimates for tomorrow's DOE/IEA inventory numbers. Also getting close to expiry in the SEP Brent contract, so likely fun & games there. It has come back in to 70 cents over SEP WTI from $1.50 last week and it trading at par with the OCT Brent contract. My guess is that it still have room to compress before its maturity, but would hate to trade it right up to the wire and get caught in a nasty short squeeze.
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Forecasts

Unread postby TheGiantWave » Tue 15 Aug 2006, 03:07:45

Reuters DOE, [Bloomberg in brackets]
CRD -1.3 [-1.4]
DST +0.8 [+0.65]
MOG -1.9 [-1.9]
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Re: Trader's Corner 2006

Unread postby mrobert » Tue 15 Aug 2006, 03:21:23

$this->bbcode_second_pass_quote('drew', 'I') read a Globe article about some lucky bloke in Calgary whose Beemer' plate read THX CNQ; kinda sounds like you a bit doesn't it?

Drew


Mines are with my company's name. But I can only use 3 letters.

At least it's fuel efficient.
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Re: Forecasts

Unread postby MrBill » Tue 15 Aug 2006, 03:42:17

$this->bbcode_second_pass_quote('TheGiantWave', 'R')euters DOE, [Bloomberg in brackets]
CRD -1.3 [-1.4]
DST +0.8 [+0.65]
MOG -1.9 [-1.9]


Thanks. Interesting. A net draw of circa -2.525 mio boe, but it has been the heating oil/distillates keeping the crack margins up, not the gasoline, that has fallen the furthest the fastest, and yet that will be at least the fourth gasoline draw in a row (if I am not mistaken)

-1.9 mio bbls est.
-3.2
-0.1
-3.2
--------
-8.4 mio bbls TTL versus the last build-up 5 weeks ago of
+1.5 mio bbls

There are likely adequate stocks of crude and distillates, although gasoline is now below 3 -years average of 209 mio bbls (my estimate), so I think the numbers could surprise on the downside (again) especially if imports drop again like last week.

$this->bbcode_second_pass_quote('', ' ')Crude oil inventories at California refineries are 11 percent higher than last year at this time, according to the California Energy Commission.
Higher crude oil supplies in California

Here is a summary of the Chinese demand year to date. Not new info, but a recap.
$this->bbcode_second_pass_quote('', ' ')Aug. 14, 2006 -- Due to the rapid economic growth and booming automobile purchases, China's net import of crude oil rose by 17.6% year on year in the first half of 2006, state media said Aug. 13.



Net imports of crude oil rose to 70.33 million tons while that of refined oil products increased to 12.03 million tons. China imported 18.23 million tons of refined oil and exported 6.2 million tons in the January-June period. According to officials, China's crude oil purchases cost the country US$32 billion and refined oil products cost $4.37 billion.


Angola, Saudi Arabia, Iran, and Russia were the top four oil suppliers for China during the six-month period.


During the first six months, China produced 91.66 million tons of crude, up by 2.1% over the same period last year, and 84.82 million tons of refined oil, representing a year-on-year increase of 5.6%. Both hit a new production record, compared with figures for past years according to statistics from the China Petroleum and Chemical Industry Association.
China's Crude Oil Imports Up 17.6%

Chinese oil companies are losing money on every imported barrel refined due to price controls in China, but are still keen to spend some of their massive foreign currency reserves to start filling their SPR that will be ready in OCT. I am dubious they are willing to spend circa $70-75 for imported crude, but if so, then this would be added into Q4'06 Chinese demand, perhaps taking up any slack from a slowing economy and falling demand in the USA?
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Re: Forecasts

Unread postby MrBill » Wed 16 Aug 2006, 06:03:28

$this->bbcode_second_pass_quote('MrBill', '')$this->bbcode_second_pass_quote('TheGiantWave', 'R')euters DOE, [Bloomberg in brackets]
CRD -1.3 [-1.4]
DST +0.8 [+0.65]
MOG -1.9 [-1.9]


Thanks. Interesting. A net draw of circa -2.525 mio boe, but it has been the heating oil/distillates keeping the crack margins up, not the gasoline, that has fallen the furthest the fastest, and yet that will be at least the fourth gasoline draw in a row (if I am not mistaken)

-1.9 mio bbls est.
-3.2
-0.1
-3.2
--------
-8.4 mio bbls TTL versus the last build-up 5 weeks ago of
+1.5 mio bbls

There are likely adequate stocks of crude and distillates, although gasoline is now below 3 -years average of 209 mio bbls (my estimate), so I think the numbers could surprise on the downside (again) especially if imports drop again like last week.



The daily chart is still negative, the hourlies are improving or at least back to neutral. It looks like some are predicting larger draws in the crude. Always a factor to keep in mind. It may not cause a change in direction, but some short covering, at least.
$this->bbcode_second_pass_quote('', 'C')rude-oil futures moved slightly higher Tuesday morning with some traders expecting U.S. data this week to reflect a decline in crude inventories, but the Israeli-Hezbollah cease fire in the oil-rich Middle East region kept a tight cap on the gains. September crude was up 12 cents at $73.65 a barrel. Prices lost more than 1% on Monday to close at their weakest level in two weeks and traded as low as $72.82 overnight. Analysts at Wachovia Corp. expect Wednesday's Energy Department data to show a decline of 3.1 million barrels in crude supplies
Crude inches higher on expectations for U.S. supply decline

Think that OCT Brent at a discount to SEP Brent and a 50 cent discount to OCT WTI is the contract to buy for a correction if there is one. Not changing my mind on overall direction, but just taking an interday flier. Nothing else new to dominate the headlines until after the numbers. Cheers.

UPDATE: OPEC cuts forecasts for 2006 world oil demand by 80.000 bbls to 1.3 mbpd
OPEC leaves 2007 forecast for world oil demand growth at 1.3 mbpd
OPEC sees demand in 2007 for its oil at 28.3 mbpd, down 800.000 bpd from 2006
OPEC sees non-OPEC supply rising 1.8 mio bpd in 2007 vs. 2006
Last edited by MrBill on Wed 16 Aug 2006, 06:09:34, edited 1 time in total.
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Re: Trader's Corner 2006

Unread postby TheGiantWave » Wed 16 Aug 2006, 06:09:07

Latest numbers.....

Reuters [Bloomberg fc]
CRD -1.6 [-1.3]
DST +0.5 [+0.5]
MOG -1.8 [-1.8]
RUNS +0.2% [+0.25%]
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Re: Trader's Corner 2006

Unread postby MrBill » Wed 16 Aug 2006, 11:02:18

$this->bbcode_second_pass_quote('TheGiantWave', 'L')atest numbers.....

Reuters [Bloomberg fc]
CRD -1.6 [-1.3]
DST +0.5 [+0.5]
MOG -1.8 [-1.8]
RUNS +0.2% [+0.25%]
[marq=down]

A bit of a bullish DOE/IEA inventory number. Demand up, stocks down, imports down and refinery runs down. Plus the US dollar is weaker and precious metals and commodities are on the whole up.

Crude –1.6 mio bbls to 331 mio bbls
Distillates +0.8 mio bbls to 133.2 mio
Gasoline –2.3 mio bbls to 205.4 mio bbls (4th larger than expected draw in a row)
Refinery Runs –0.1% to 91.5%

Imports –143k to 10.02 mbpd
Product imports +398k to 3.83 mbpd

Total demand +0.3% to 21.08 mbpd
Distillate demand +3.5% to 4.04 mbpd
Gasoline demand +1.7% to 9.61 mbpd

But API breaks that demand down a little different and the results support my pet theory about transport demand being relative robust due to a lack of alternatives, while stationary fuel and feedstock fuel demand have eroded to high prices and a slowing economy. At least that is how I interpret them.

API total demand –0.2% to 20.82 mbpd
API distillate demand +9.2%
API gasoline demand +1.7%
But
API jet fuel demand –8.6% (in the middle of the summer holiday travel season)
API residual fuel demand –26.1% (that stationary and feedstock demand we were talking about)!

So it comes as no surprise to me that the market discounts the inventory numbers and instead of rallying, continues along the trend lower. Not enough of a shock to cause the shorts to cover their positions. Perhaps they are looking at that decrease in ex-transport demand due to a slower economy (PPI ex f&e –0.3%, CPI ex f&e +0.2%), which certainly shows up in the API residual fuel demand number, which is –26.1%! Even if not as transparent in the headline number?

That I went long crude after the number is just proof the market is heading lower at least in the short-term until maximum pain = minimum gain and I am forced to take my stop loss and lick my wounds until next week’s inventory data! ; - )

$this->bbcode_second_pass_quote('', 'C')rude oil fell to the lowest in almost a month on signs that U.S. economic growth is slowing and nationwide inventories are sufficient to meet demand.

U.S. prices eased and housing starts fell in July to the lowest in almost two years, government reports today showed. Surging economic growth has bolstered fuel demand and prices. Crude oil stockpiles slipped 1.6 million barrels last week, the U.S. Energy Department said. Supplies still were up 10 percent from the five-year average.

Oil Falls to Four-Week Low on Signs U.S. Economic May Slow
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Re: Trader's Corner 2006

Unread postby MrBill » Thu 17 Aug 2006, 03:51:49

An improved sentiment in the ME for the time being on the back of the cease fire between Hizbollah and Isreal, and Iran at least speaking about talks between them and the EU over the nuclear enrichment issue has taken much of the fire out of the market. As well forecasts of higher supply combined with lower demand are also weighing heavy on the market.

$this->bbcode_second_pass_quote('', 'T')he Organization of the Petroleum Exporting Countries lowered its 2006 oil demand forecast by 80,000 barrels a day, citing an unexpected decline in OECD country demand. It's expecting demand in 2006 to rise 1.3 million barrels a day to 84.5 million barrels a day. Growth in the OECD countries is expected to be somewhat stronger in the second half of this year given the stabilization of gasoline prices, continued economic expansion, and normal weather in the fourth quarter, OPEC said. It held onto its view that oil demand should rise 1.5% in 2007.
OPEC revises lower 2006 oil demand view; keeps 2007 forecast

The daily is solidly bearish having not only taken out trenline support, being below the 13- and 21-day moving averages, but has also breached the 0.682R support level. In the WTI this indicates a test of $70 ahead of contract expiry. Weekly long term support comes in much lower. A test of the previous low of $68 is not out of the question from the technical side.

The market ignored the draw in gasoline and higher demand numbers instead focussing on higher import numbers, including product imports, perhaps something I missed in yesterday's comments. Sorry. Keeping in mind that the market usually discounts API data in favor of DOE/IEA numbers.

$this->bbcode_second_pass_quote('', 'U').S. gasoline consumption rose in
July as motorists were able to cope with higher prices during
summer vacations, an industry report showed. Diesel-fuel use last
month jumped 13 percent from a year earlier.
Deliveries of gasoline, a measure of demand, averaged 9.6
million barrels a day in July, up 1.7 percent from a year
earlier, according to the monthly report from the American
Petroleum Institute. Consumption during the first seven months of
2006 averaged 9.2 million barrels a day, up 0.9 percent from same
period in 2005.
Because of income growth, ``it's quite possible that people
can deal with the rise in prices easier than in the past,'' Ron
Planting, an analyst with the Washington-based institute who
wrote the report, said in an interview.
Regular gasoline at the pump averaged about $3 a gallon in
July, up 30 percent from a year earlier, according to Planting.
Demand for distillate fuel, a category that includes diesel
and heating oil, averaged 4.22 million barrels a day in July, up
9.2 percent from a year earlier, the institute's report said.
``This has been a strong month for diesel demand,'' Planting
said. ``We have had several weak months so we may just be
catching up. Demand was down in April and June and posted only a
small gain in May.''
Diesel consumption averaged 3.39 million barrels a day, up
13 percent from July 2005, and heating oil demand averaged
831,000 barrels a day, down 3.3 percent.

Record July Imports

The U.S. imported 14 million barrels of crude oil and
petroleum products in July, 2.4 percent more than July of 2005.
It was a record for July and the fifth-highest monthly total
ever, the report showed. Crude oil imports rose 1.8 percent from
a year earlier to 10.4 million barrels a day.
Imports of petroleum products such as gasoline and diesel
were up 4.2 percent from a year earlier at 3.61 million barrels a
day. Gasoline imports, including blending components, averaged
1.27 million barrels a day, up 20 percent. Distillate imports
surged to an average 383,000 barrels a day in July, up 58 percent
from a year earlier.
The U.S. pumped 5.12 million barrels a day of crude oil last
month, down 65,000 barrels, or 1.3 percent, from a year earlier.
July production was down 47 percent from peak output of 9.6
million barrels a day in 1970.
The American Petroleum Institute represents U.S. oil and
natural gas companies.

Source: Bloomberg, August 17th, 2006


So again you can read that as higher imports of gasoline and distillates including diesel making up for higher demand for transport fuel. The bad news is that if $3.00 at the pump cannot curb demand, then by extension either interest rates or fuel prices will have to climb further to bring inflation down and reduce consumer demand. Pick your poison?
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Re: Trader's Corner 2006

Unread postby Chaparral » Thu 17 Aug 2006, 04:04:58

It is interesting to note that corn and wheat and to a degree, gold also followed todays pattern of making an early high shortly after opening and then finishing a good deal lower. The grains did this inspite of increased demand. Some have said that physical buying is supporting gold as well.

The pattern is that the numbers decrease inspite of bullish news.

I am long on everything now and am damn grumpy that they haven't rallied to spectacular highs so I can take profits for the weekend :lol:

It also seems as if sometimes the people writing up the news reports are making up bullshyte stories to explain the chart action after the fact. Vic Niederhoffer, did you perfect that computerized robot market commentator yet :twisted:
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Re: Trader's Corner 2006

Unread postby MrBill » Thu 17 Aug 2006, 04:50:36

$this->bbcode_second_pass_quote('Chaparral', 'I')t is interesting to note that corn and wheat and to a degree, gold also followed todays pattern of making an early high shortly after opening and then finishing a good deal lower. The grains did this inspite of increased demand. Some have said that physical buying is supporting gold as well.

The pattern is that the numbers decrease inspite of bullish news.

I am long on everything now and am damn grumpy that they haven't rallied to spectacular highs so I can take profits for the weekend :lol:

It also seems as if sometimes the people writing up the news reports are making up bullshyte stories to explain the chart action after the fact. Vic Niederhoffer, did you perfect that computerized robot market commentator yet :twisted:



To be fair, last summer, as we were making new highs, climbing on average 0.5% per day, the inventory no.s were bearish, bearish, bearish, but the market ignored them. So it is perfectly reasonable to expect that as we make the cat walk backwards that the selling will continue unabated despite some bullish news here and there? Afterall $70-75 is not $40-45 is it? Maybe once we get to $50-60 you can start to see value investors versus speculators come into the picture?

But I agree about commentators. In my next life I am going to write news stories for Reuters. Each morning I will prepare two reports, almost identicle, except in their conclusions. Then as soon as the numbers come out I can quickly update them. Later after the market either rallies or declines I can chose which version to publish. The bullish take on events or the bearish take on events? Easy peasy.

We are at $71 in the SEP WTI and below $72 in the OCT Brent after yesterday's expiry. No large buying interest at these 'round' numbers to be seen, yet. There has to be some nervous structural longs out there now since we have some off from the $78.40 area. Almost -10% now. Syria's inflammatory remarks were pretty much ignored. They must be praying to Allah that Iran says or does something stupid at this point?

Where is Chavez when you need him? Oh he is too busy selling his refineries in the US, and giving away his country's wealth to Jamaica, Belize, Dominica, Saint Kitts, Saint Vincent and Grenada. Plus his buddy Castro is feeling under the weather, so he is too absorbed in his Hood Robin to make too many waves at the moment.
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Re: Trader's Corner 2006

Unread postby cube » Thu 17 Aug 2006, 11:57:16

$this->bbcode_second_pass_quote('Chaparral', '.')..
It also seems as if sometimes the people writing up the news reports are making up bullshyte stories to explain the chart action after the fact. Vic Niederhoffer, did you perfect that computerized robot market commentator yet :twisted:
Ever noticed the news media ALWAYS has an answer to everything? The accuracy of such analysis can be questionable. Kinda like Brainy Smurf.

You'll never see a news article titled: "Crude drops and nobody has any clue why!" :P

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Re: Trader's Corner 2006

Unread postby Chaparral » Thu 17 Aug 2006, 12:04:38

Well, tomorrow crude is gonna ring the 90 dollar bell adn unleaded is going to be trading for 3 bucks a gallon Sept contract.

I know this. How do i know it? Because I just closed out all my longs at a loss [smilie=angryfire.gif].

I'm holding onto my longs in the grains however so expect corn to drop to a buck a bushel and wheat to drop to a buck fifty :razz:
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Re: Trader's Corner 2006

Unread postby truecougarblue » Thu 17 Aug 2006, 13:40:33

I closed my longs in the miners this morning for a reasonable gain, and made a few bucks shorting TOL.

My long position in GLD is down 2% now but I'm holding pat.
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Re: Trader's Corner 2006

Unread postby BAM » Thu 17 Aug 2006, 15:51:13

My Prediction

Unleaded futures drop to 1.85 and then bounce back to 2.00-2.04

crude oil futures drop to 68.00 then bounce back to 72.00
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Re: Trader's Corner 2006

Unread postby TheGiantWave » Fri 18 Aug 2006, 03:18:22

$this->bbcode_second_pass_quote('TheGiantWave', 'o')n Brent/Ti... the Sep arb rolls off shortly and if you look at Oct it is trading a 45c Wti over Brent. This moved up from about 13cents ovre on the Prudhoe story.

From here with the lack of hurricanes and the Prudhoe story less severe than anticipated I still think the risk is to the downside on this trade.


this has really moved lower with the slip in flat price and Sep rolling off the board.

Normally Friday would have you looking for the bounce (given the decline on the week) but today I'm not so sure... range support in the 68-70 area. Above the market the key number is the 100day ma (aroudn 7165ish) which also ties in with a noticable low
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Re: Trader's Corner 2006

Unread postby MrBill » Fri 18 Aug 2006, 03:31:51

$this->bbcode_second_pass_quote('Chaparral', 'W')ell, tomorrow crude is gonna ring the 90 dollar bell adn unleaded is going to be trading for 3 bucks a gallon Sept contract.

I know this. How do i know it? Because I just closed out all my longs at a loss [smilie=angryfire.gif].

I'm holding onto my longs in the grains however so expect corn to drop to a buck a bushel and wheat to drop to a buck fifty :razz:


Here is what Goldie Sachs has to say about the grains heading into the weekend.
$this->bbcode_second_pass_quote('', 'A')griculture Comment Commodities

Low inventories suggest upside potential for corn,
wheat and soy prices

Reductions to US crop outlook suggest a tighter soybean market
Our fair value models suggest soybeans are no longer fairly priced and may have significant upside potential.

Corn outlook remains firm

While yields in the US are now seen higher, the overall impact on inventories is likely to be modest, suggesting the potential remains for further price increases.

Wheat inventories likely to remain low

With little change to the wheat outlook, we continue to see substantial upside potential to prices.

WASDE estimates remain supportive for grains

The USDA released its World Agricultural Supply and Demand Estimates (WASDE) for August last Friday. While the market appears to have focused on the increase to US corn yields and thus ending stocks, we believe that the fundamental outlook for corn is in fact little changed. Instead, we find the substantial downward revisions to projected soybean inventories to be more significant, with our fair value models now suggesting upside
potential for soybean as well as corn and wheat prices. Decline in projected soybean inventories suggests upside potential for prices
Projected soybean inventories have been reduced sharply over recent months, thus pushing our fair value estimates significantly higher. As market prices remain relatively unchanged, we now believe a buying opportunity has emerged for soybeans.

US ending stocks for 2006/07 are now projected by the WASDE at 55 days of forward cover, down by 14 days from the July estimate and by 25 days since the first estimates were introduced in June. Extremely hot and dry weather has adversely impacted the US crop, and continued spread of Asian Soy Rust (most recently found in Louisiana) continue to pressure the crop outlook. With ending stocks for the rest of the world virtually unchanged, the deterioration in the US supply outlook has pushed expected global inventories down by more than 5 days of forward cover to 83 days.
Until recently we have viewed soybeans as relatively fairly valued, as 2005/06 inventories are likely to reach historically high levels.

The downgrades to the 2006/07 harvest, however, now suggest a draw in global inventories and thus a higher fair value. Our models now suggest a fair value of 760 cts/bu, an increase of more than 80 cts/bu from our July estimate and well above the current market price of 552 1/4 cts/bu for the Improved US corn production doesn't change the bullish outlook The August WASDE showed a significant increase to US corn yields, and thus production and ending stocks, which prompted a sell-off in the market. However, we believe that closer examination of the WASDE data suggests the supportive story for corn remains intact. The impact on global ending stocks was much more modest, and both US and global inventories are projected to remain at historically low levels. Moreover, ethanol-based demand for corn will likely provide continued support for demand.

The USDA raised its projection for US corn yields to 152.2 bu/acre in the August WASDE report, up from 149.0 bu/acre in the July report (see Exhibit 3). As the area planted in the US was left unchanged, production for 2006/07 was increased by 236m bushels, a 2.2% increase over the estimate from July. This gain in output was only partially offset by higher consumption, and thus the ending stocks estimate for the 2006/07 crop year was raised by 155m bushels.

We believe that this improvement in the US corn supply outlook does not significantly change the bullish fundamentals supporting the corn market. Ethanol demand is still seen rising by 550m bushels (34%) over 2005/06, and as a result ending stocks are still
expected to be relatively low by historical standards. Moreover, the current corn crop in the US has suffered from hot, dry weather, which has kept the crop conditions index below historical averages (see Exhibit 4), and thus risks to the US crop remain.

Production is expected to decline year-on-year in most key producing regions, including Argentina, Brazil, China and Europe. Hot and dry weather in Europe is likely to result in further downgrades to production estimates, particularly in France and Ukraine. The USDA’s estimates have brought the projection for US ending stocks in 2006/07 up by 4.6 days to 38 days of consumption over the July estimates (see Exhibit 5). However,
inventories outside the US have been reduced by 1.5 days to 47 days of forward cover on lower beginning stocks and lower production. As a result, global stocks are now seen up only modestly, by less than a day of consumption to 46.9 days. As a result of the higher stocks in the US, our fair value estimate has fallen by 22 cts/bu to 340 cts/bu. This is still well above the current market, and thus we continue to believe that corn prices have
substantial upside potential.

Wheat inventories remain very tight, keeping fair value estimates high The wheat balance for 2006/07 continues to suggest substantial upside potential for wheat prices. The August WASDE made only modest revisions to the July estimates, leaving our fair value estimates at a level still well above current market prices.
US wheat production estimates for the upcoming crop year were reduced slightly as hot, dry weather has continued to pressure crop development, and as the consumption forecast was left unchanged the expectation for next year’s ending stocks fell by less than a day’s worth of consumption to 77 days of forward cover (see Exhibit 7).

Global ending stocks estimates were also reduced, primarily because of a 7m mt decline in EU production in the wake of extremely hot weather. As a result, global ending stocks are now seen at 76 days of forward cover, down from 79 days in the July report. These relatively modest downward revisions to ending stocks for 2006/07 have pushed our fair value estimates up by 7 cts/bu to 480 cts/bu (see Exhibit 8). With September 2006 wheat trading at 371 1/2 cts/bu, we believe that wheat continues to have substantial upside potential. Global wheat inventories as projected by the USDA will reach a historically low level, while US inventories will be at the lowest level in nearly a decade.

While there is some indication that feed demand for barley is benefiting given the higher wheat price in recent months, we think it likely that ethanol based demand for corn will also push some feed demand out of corn and into wheat at the margin, thus leaving
demand relatively stable. With crops already stressed by poor weather, the market remains at risk from further downward revisions to supply, and as inventories are already extremely tight this could result in sharp upward price movements.
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Re: Trader's Corner 2006

Unread postby MrBill » Fri 18 Aug 2006, 06:13:41

$this->bbcode_second_pass_quote('', '[')b]What a bunch of losers...

All's not well at the well-head


ON MAY 1st Bolivias socialist president, Evo Morales, nationalised his country's oil and gas industry with a bang. He sent troops to the gas fields, and put YPFB, a state company, in charge. On August 11th the government emitted what sounded like a whimper: the full effect of YPFBs takeover would be temporarily suspended owing to lack of economic resources. It needs a $180m loan from the central bank, currently prohibited by law. It's a problem of cash flow, not the stopping of nationalisation, says Pablo Solon, a Bolivian trade negotiator. Money is not the problem, retorts Carlos Miranda, a former energy minister. It is not knowing the business or being able to control it.

Mr Solon denies that the government will now seek a bail-out for YPFB from Hugo Chavez, Venezuela's president and an ally of Mr Morales. Besides, Venezuelas state oil firm, PDVSA, has little gas expertise to spare for YPFB. Meanwhile, more then 30 energy companies have stopped operating in Bolivia since May and investment has dried up, claims the Hydrocarbons Chamber, an industry group.

http://www.economist.com/displayStory.c ... ID=7796452


Bit of a rally in the crude here leaded by positive gains in the unleaded and the heating oil, but the crack margins for unleaded at weak, $8.33 per barrel, so this may just be short-covering and position squaring ahead of the weekend? Don't forget, August 22nd, is a special day in Iran and at the UN, so never discount the headline effect of inflammatory rhetoric coming out of Tehran. Never the less, the market is bearish and will tend to discount bullish news unless it is massive. I will try it from the long-side on the back of the hourly charts, but I am not willing to hold it if we break overnight/yesterday's lows again. Have a nice weekend. Cheers
$this->bbcode_second_pass_quote('', 'C')rude oil futures in New York fell to the lowest price in almost two months on decreased demand for gasoline at the end of the summer driving season.

Demand for the motor fuel fell 1.7 percent last week, the biggest weekly drop since April, the U.S. Energy Department said yesterday. Gasoline futures have dropped 17 percent since Aug. 2 to their lowest price in more than four months as the period of peak demand in the U.S. draws to a close.

``Gasoline has been the leader,'' said Tom Bentz, an oil broker with BNP Paribas Commodity Futures Inc. in New York. ``It's mid-August and there's a feeling we have seen the worst of the gasoline season'' without any hurricanes or demand surges to spur prices higher.
Crude Oil Falls Close to Two-Month Low on Weak Gasoline Demand

Update: Closed my long here on a rally ahead of the NY session. Just feel better locking in a profit ahead of the weekend. Hope you have a good one.
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