[MrBill]

Metals comments compliments of Dresder-Kleinwert-Benson-Wasserstein-Aktien-Gesellschaft
$this->bbcode_second_pass_quote('', ' ')Market comment

Gold: Continuing to drift lower yesterday morning, gold lost almost $5 from the European open to reach lows of 545 just after the New York open. Despite EUR also starting to sell of as USD strengthened on more positive data at this point, a rallying silver price dragged gold higher again back up to the opening levels just shy of 550. Mired mid range, the yellow metal is looking for inspiration to break out of the 545-55 range let alone the 535-75 range.

Silver: All news is good news it seems for silver as the ETF announcement
seems to keep on driving the price higher. Higher oil and base metals also
helped yesterday as silver gained almost 20c from a weaker start at 10.47 to close at 10.65. The upwards bias has continued this morning with 10.71 traded earlier today, continuing to set new 22 year highs. Some resistance might be expected here, and any news regarding the listing or start of trading of the ETF is also expected to have an impact on the price.

Platinum: News that Japan has decided to include platinum in its rare metals reserves for the first time seems to have had little impact on the prices so far. With attention firmly fixed on silver, platinum managed only minor gains yesterday, keeping to a narrow range around 1,040. Failure to take out resistance around here and look higher towards 1,060 in the nearer term may signal further consolidation to come.

Palladium: Losing a little ground, palladium dipped briefly below 315, but
recovered some of the move before the close. Overnight the metal was
supported by weaker JPY sending the domestic price higher and the metal
has moved higher again in Europe this morning. Next upside target on further demand might be 335 highs from 2004.

[MrBill]

After turning briefly down on the hourly this morning, all models have switched back to long going into the afternoon session. Therefore, given it is Friday, expect to see some follow through buying in the NY time zone. Likely a strong close to the week, which will coincidentally put crude in the near months into over bought territory. It's all about geopolitical concerns this week, oversupply be darned. Will keep the longer term rally expanding as refineries take scheduled maintenance ahead of the summer driving season and the switch over to low sulfur diesel and ethanol instead of MTBE. At least that is the word heard on the floor. Not a good week for me. My models were right, but the market chopped me out of some core positions too early. Oh well, that's show biz.

$this->bbcode_second_pass_quote('', 'O')il Trades Near a Six-Week High as U.S. Gasoline Demand Rises
March 24 (Bloomberg) -- Oil traded near a six-week high in New York on concern rising demand for gasoline and extended refinery maintenance in the U.S. may erode supplies before the summer driving season.

Gasoline demand the past four weeks is up 1.6 percent from a year earlier, the U.S. Energy Department said March 22. U.S. refineries are undergoing an extended maintenance period in order to produce gasoline by May that can be blended with ethanol, rather than another fuel additive that has polluted groundwater

[MrBill]

Sorry, I really have not adequately sized up the markets yet today. A bit slow outta the box.

What I do see is a strong close on Friday, which keeps the daily and weekly charts in positive territory and the bull rally intact. This is presumably on the back of the Nigerian supply disruptions and concerns over Iran, although as background noise we have jokers like Chavez promising to shoot arrows at invading US soldiers. However, the market did open up weaker on the hourly and short term indicators, assumedly on relief that nothing blew-up over the weekend and on the back of higher than normal crude oil supplies in the US market. The same dynamic as for the past 4-6 weeks.

My feeling is also lower here, but I have been chopped up by wild two sided trading in NY last week, so am leary of selling near the bottom on the daily range in expectation of follow through weakness. That just has not been the right way to play this market as of late. Never the less a break of $6280 in the Brent or $63.50 in the WTI should open the way for fifty cents lower ahead of the afternoon session. Then we will have to see which way NY favors it this week.

The funds should be keying off those strong closes and looking to add fuel to their long bonfire. However, a decisive break of $64-65 is indeed needed to keep this rally alive or risk slipping back into a well-worn range.

Here are the metals compliments of DRKW.
$this->bbcode_second_pass_quote('', ' ') Dresdner Kleinwort Wasserstein, Theodor-Heuss-Allee 44-46, 60486 Frankfurt am Main. A Member of the Dresdner Bank Group.
Market comment

Gold: Friday’s trading finally broke above the recent resistance in the mid
550s and reached a high of 560.50 just before the close. Gaining just over
$10 from opening levels, gold however remains within the broader 535-75
range and likely needs to breach 570 in order to reopen the possibility of new highs. Combined non-commercial net-length rose in the week to 21Mar06 by 500koz to 13.6mmoz, still below the highs, although net length may have increased again with the week’s end trading and price rally.

Silver: Trending upwards at a steadier rate, silver also ended the day higher on Friday. Strength coming from the anticipation of the listing of the silver ETF continued despite the increasingly overbought nature of the daily, weekly and monthly charts, albeit at a slower pace. Borrowing of silver was also notable again. Opening at 10.68, silver reached a new high of 10.72 on the close, but resistance there limited Friday’s gains. Further buying overnight in Asia and this morning have pushed silver towards 10.90, with further upside apparently likely at least until the timeframe for the ETF launch becomes clearer.

Platinum: Following silver and then gold higher, platinum still kept to a fairly narrow range between 1,040 and 1,045. Better progress was made overnight with Japan again on the buy side and lifting the price to 1,054. The key level on the upside appears to be 1,060 – the March highs – with a break here reopening the potential for 1,080 and the

Palladium: Holding above the 10dMA, palladium springboarded higher on the back of silver’s gains and perhaps also on the news from Russia concerning higher expected internal demand (following on from lower expected production statements from Norilsk earlier in the year). Speculative interest in the afternoon lifted prices from 316 towards 330, finally closing at 328.

[Typhoon]

$this->bbcode_second_pass_quote('MrBill', 'N')ot a good week for me. My models were right, but the market chopped me out of some core positions too early. Oh well, that's show biz.

[joewp]

$this->bbcode_second_pass_quote('Typhoon', '
')Then again, maybe I'm foolish to think that such a simple concept could work. It seems like successful trading systems must be sophisticated, or everyone would create them.

[MrBill]

$this->bbcode_second_pass_quote('joewp', '')$this->bbcode_second_pass_quote('Typhoon', '
')Then again, maybe I'm foolish to think that such a simple concept could work. It seems like successful trading systems must be sophisticated, or everyone would create them.

[MrBill]

According to a Turkish newspaper called Vatan, Germany's Angela Merckel told Turksih PM Recep Tayyip Erdogan that "the US was planning a military strike on Iran if that nation fails to prove that its nuclear program is intended for peaceful purposes only." These comments have been reprinted on Bloomberg and are no doubt partially responsible for the rally today.

It goes on further to say that Merckel urged Erdogan "to persuade Iran's political leaders that the threat of US military action is a very serious one". Germany and other EU governments have called upon Tehran to halt is enrichment activities, but top German officials deny that the military option is on the table.

Iranian President Mahmoud Ahmadinejad is not about to back down internationally. He is enjoying support at home with "comments heavy on promises to create jobs and wipe out corruption, and spiced with nationalistic fervor" and has promised "not to back down on iota" over Iran's right to nuclear technology. "Many Iranians link nuclear achievement to national pride" despite high unemployment and struggling to make ends meet for many workers in the world's 4th largest oil exporter.

Bush/Cheney + Chavez + President Mahmoud Ahmadinejad + Nigeria = $70 per barrel oil despite rising US inventories. But first we need to clear resistance above $65 in the short term.

Not to mention those Funds looking to report good end of the quarter results and a possible labor strike in Norway over pay, foreign workers and early retirement.. What is that? Please let us retire early on generous terms, but do not give our jobs to lower paid foreigners? ; - )

[MrBill]

The daily & weekly charts and their moving averages are still pointing north, but we are now in overbought territory in the crude, so follow through buying will have to come via the products and assumably a larger than expected draw in unleaded and distillate inventories today to keep this rally alive ahead of the end of the quarter.

Many fund managers must be crossing their fingers and hoping for a few dollars higher this week ahead of fresh money in the second quarter.

The short term technicals were pointing a little lower, but that is mainly because Europe lacks the conviction or the courage to take it higher on their own and will wait instead for some moral support from the States. Maybe some slight position squaring ahead of the DOE inventory numbers this afternoon.

The numbers are forecast as follows:

Crude f/c +1.0 +3.0 mio bbls
Distillates f/c -2.0 -1.3 mio bbls
Gasoline f/c -1.8 -1.3 mio bbls
Refinery runs f/c +.03% +0.4% to 86.7%
tomorrow's
Nat Gas f/c -95 -65 bcf

Daily news compliments of PVM $this->bbcode_second_pass_quote('', ' ') A whole host of supply concerns came together yesterday, which pushed the market through technical resistance and brought in another tranche of buying. WTI ended the day $1.91bbl higher, Brent gained $1.36bbl, Heat 4.7cts/gal and Unleaded 5.6cts/gal. We had anticipated that the breakout would have a major headline as its catalyst but instead it appeared to be an amalgam of minor headlines that all pointed in the direction of supply disruptions or disappointments and increased demand pressures.

In no particular order of importance the elements are:-
- Although there is talk that Shell’s EA offshore field will resume production soon the Nigerian Oil Minister was reported to have said that he did not anticipate Delta region production to resume soon. The fact that President Obasanjo has called for a meeting with the militants on April 5th reflects the seriousness of the situation and its potential longevity. When the US refining system returns from its period of heavy maintenance any lost Nigerian sweet barrels will be much more badly missed than they are now.
- The Iraqi Oil Minister admitted yesterday that there would be no exports from Northern Iraq via Ceyhan for at least 8 months. He described the pipeline manifold damage from sabotage as so extensive that it would require a major effort to get it back into operation.
- Yesterday’s strikes in France impacted on Total’s refinery operations with half of its six refineries disrupted to some extent. More strikes are expected.
- Norwegian strike season will soon be upon us and initial reports are that it will not pass off peacefully.
- Ethanol supply worries mount and the US Energy Secretary says that he knows of no plans for deferments or waivers.
- On the demand side large flows of new fund money are anticipated for 2Q. There is suspicion that some of yesterday’s buying was in anticipation of this.
- Iran tensions could move from simmering to bubbling if the 5 UN veto holding powers fail to agree a resolution wording this week in Berlin.
- The hurricane season is expected to be at least as bad as last year and is officially only 9 weeks off.
- Yesterday’s US interest rate hike, with more to come, could increase the flow of speculative money from equities to commodities. The final expectation for today’s US oil stock figures is for an 800,000bbl crude build, a 1.4 million bbl distillate draw and a 1.3 million bbl gasoline draw. Gasoline is the ultra-sensitive contract at the moment. If crude draws again rather builds, as happened last week, and the gasoline draw exceeds expectations, yesterday’s move to a new price range is likely to be confirmed.

[MrBill]

Iran says will not suspend uranium enrichment. The standoff continues. The price of crude continues to trend higher lead by unleaded gasoline which has trade up to $1.9650 today. Been a one way market this week so far.

Here are some comments from Goldman Sachs.
$this->bbcode_second_pass_quote('', 'A')fter bumbling along in the red for the most past of the day after yesterday's impressive rally, the market looked for direction from the weekly crude stats, which pointed in both directions with a bearish crude number (bigger build of 2.1mbls vs est 950kbls driven by a much-mooted rebound in imports of 769kbpd after two weeks of 814kbpd decreases on aggregate), but bullish gasoline (5.34mbl draw vs est 1.45mbl draw) and distillate (2.5mbl draw vs est 1.25mbl draw) numbers.

After an initial product-induced pop higher May WTI slid back down towards but not quite hitting the earlier lows of 65.58, as the market digested the highest level of US stocks since April 1999. It then seemed to catch a bid as products, notably gasoline, held court, with April gasoline closing up over 3% and just off the $1.96 highs.

The fate of spreads was somewhat sealed with the return of the 10mbpd+ weekly import number (10.1mbpd - notably Atlantic Coast PADDI and Gulf Coast III - taking the 4 week average to 9.9mbpd, still 170kbpd below last year) with May/June 17c weaker settling 1.02 contango and while refinery runs continued to tick up, the 85kbpd increase to 14.7mbpd, was not enough to mitigate the larger than expected build.

The FT this morning cracks a nod to the contango issue and what it means for index roll yields. Not a new topic. Back to the gasoline market, it was the biggest drop in gasoline stocks since August 2003 against a backdrop of solid gasoline demand (up 1.3% yoy), despite increased production and robust imports (once again over 1mbpd - the 8th week in a row) that stood out and lead the way higher into the close.

However, while the fundamentals look solid, there is arguably a fair amount of that good news priced in. With spec changes imminent, and as such RFG becoming persona non grata and only fit for export, as well as turnarounds coming to an end by the end of the next month, there is the belief that with April gasoline off the board (as of Friday) the current willingness to add to length should dwindle. RFG cracks in Q2 above $12 look a sale and indeed there was evidence throughout the day of steady gasoline crack selling from Q206-Q107.

At the end of the day, May WTI closed off the 66.65 highs, but still closed on a relative high note up 38c at 66.45. Next resistance at 66.62 - the continuation high on the 6th Feb. Nat gas was the laggard yesterday, with April expiring yesterday up 26bps amid a mixed cash market and loosely following the products with focus today on stats at 16.30BST with consensus looking for a draw of 85bcf (GS auction 97bcf).

Trading down to 66.05 this morning May WTI has rebounded, currently up 17c at $66.62/bl Still looks like you got the love to see you through until month and quarter end....(but will next week be the week to throw your hands - and longs - up in the air?...)

[Typhoon]

I am starting a trading journal, but I felt that I shouldn't post all of my trades here. You can find my journal in this thread. I am currently short at the moment. I am bullish for the medium-term, though, so I might reverse and go long.

For the long-term, I just don't know! There are so many catalysts which could drive oil and the products higher, but the fundamentals are bearish in my opinion, unless we start to see evidence of peak oil. On the other hand, I'm definitely bullish on natural gas since domestic supply will be tight enough that we could see a big spike, perhaps to $20 or more, if the 2006-07 winter turns out to be cold. I'm optimistic about LNG in the future but I'm not sure how quickly LNG capacity can be expanded.

[MrBill]

Metals comments compliments of DRKW.
$this->bbcode_second_pass_quote('', 'M')arket comment

Gold: With week end, month end, and quarter end today, gold showed no
signs of giving back any gains yesterday. Opening at 574.50 around the prior Jan06 highs, gold moved up to 580 before finding some resistance, but did not pause there long. Further speculative buying in New York hours lifted the market over this hurdle and closed on the highs at 586.75. Reaching 588.50 overnight, gold has not so far this morning made a further move towards 600.

Silver: Silver also closed on the highs with a 50c gain from 11.20 in the
morning to 11.70 on the close as buying accelerated. Reports of a comment from an Amex official claiming that the silver ETF could begin trading as early as next week have not been confirmed by Barclays, but this could increase the risk in silver of a high close today and a profit taking driven move lower next week. Given silver’s volatility, a drop of $1 or more if liquidation gains momentum cannot be ruled out. Highs this morning were 11.90 at the time of writing.

Platinum: Positioned between the precious metals and the industrial metals
and with gains in gold, silver, and in base metals, we should not be overly
surprised that platinum has posted new all time highs. Trending higher
throughout the day, platinum did not break the 1,084 former all time high until after the New York open and volumes remain speculatively driven. Also closing on the highs at 1,088, platinum has overnight traded 1,093 but eased back in line with silver.

Palladium: Reaching 345 by the London morning fix, palladium held steady
for the rest of the afternoon between 340 and 345, perhaps still looking at
supply side stories from Russia. After 2000/01 it will take much greater
substitution and demand to being back all time highs for palladium, but the
price remains firm above the highs seen since the retracement from the lofty 1,100 highs.

[smiley]

$this->bbcode_second_pass_quote('', 'T')here are so many catalysts which could drive oil and the products higher, but the fundamentals are bearish in my opinion,

[Typhoon]

$this->bbcode_second_pass_quote('smiley', '')$this->bbcode_second_pass_quote('', 'T')here are so many catalysts which could drive oil and the products higher, but the fundamentals are bearish in my opinion,

[Typhoon]

I could certainly be wrong, but I feel that today's pullback means that we are no longer overbought, and are ready to move higher.

I'd also like to make a comment about the notion that the price of oil is a bubble that is about to burst. I'd argue against this notion for another reason than just the possibility of peak oil. Commitments of Traders reports usually show that speculators are net short. If it was a speculative bubble, they'd be net long. I really think that the price does reflect supply and demand accurately. If the price really will move down in the future, it will take bearish fundamentals for that to happen. There is no "bubble" that will "pop" on its own.

Like I emphasized in my last post, I only said that the fundamentals seem bearish at the moment. My long-term bias is actually bullish.

[MrBill]

Strong close yesterday in the crude. We were sub-$66 in the WTI up to about 30 mins before the close and then they brought in the big cannons. Took it up to $66.80 in no time. Settled around $66.60 which a strong close compared to where we opened on Monday, but shy of the overnight high so a negative on the daily charts. Whether we go higher will depend on fund buying on Monday. Do they have fresh cash to throw at this rally?

When commentators say the market is high due to fund buying what do they mean?

Basically, as the fund accumulates a long it is net demand, but unless the fund waits until maturity and then takes delivery of the physical product then net-net that long is unwound at the end of each month. As the market has been in contango that means the nearby month is expiring each time at a discount to the next month. This means that all those long only funds and indices are booking a loss every month as they roll their positions forward.

Net-net the funds can only maintain the rally in oil, gold, silver, etc. if there is constantly new money flowing into new long positions, or as I said, they are taking delivery at maturity and forcing the shorts to cover. In my mind this is a pyramid scheme. Let us see how it ends?

Unleaded finally was in backwardation so I assume those funds were able to roll their longs at a premium this month, so long as they executed them early enough. I think at one point about an hour before the close the unleaded was still in deep negative territory on the day. This smells to me like an engineered strong close for quarter's end? About 10 mins before the settle, someone stuck an order in to sell 420 contracts of WTI on the IPE, the market dipped, and then they pulled their order. That by the way is illegal, it is called market manipulation. But in a fast market hard to say who did what for what purpose? Still buyer beware....

Have a nice weekend. Cheers.

[drew]

Maybe I'm being lazy, and maybe not. Where do you guys get your data MrBill? I look at Kitco for my metals, and nymex for oil and gas. I have spent a little time looking at futures on the nymex, and don't beleive I am looking at realtime data, although I'm not sure. Are a lot of the sites you use pay? Just curious, I went to ICE, and it seems to be pay so I gave up.

Thanks

Drew

[MrBill]

$this->bbcode_second_pass_quote('smiley', '')$this->bbcode_second_pass_quote('', 'T')here are so many catalysts which could drive oil and the products higher, but the fundamentals are bearish in my opinion,

[SeattleGuy]

$this->bbcode_second_pass_quote('drew', 'W')here do you guys get your data MrBill? I look at Kitco for my metals, and nymex for oil and gas. I have spent a little time looking at futures on the nymex, and don't beleive I am looking at realtime data, although I'm not sure. Are a lot of the sites you use pay? Just curious, I went to ICE, and it seems to be pay so I gave up.

[MrBill]

$this->bbcode_second_pass_quote('drew', 'M')aybe I'm being lazy, and maybe not. Where do you guys get your data MrBill? I look at Kitco for my metals, and nymex for oil and gas. I have spent a little time looking at futures on the nymex, and don't beleive I am looking at realtime data, although I'm not sure. Are a lot of the sites you use pay? Just curious, I went to ICE, and it seems to be pay so I gave up.

Thanks

Drew

[smiley]

hello Drew, you might also want to watch the middle east economic survey
and rigzone.

www.mees.com
www.rigzone.com

www.arabnews.com also carries interesting oil stories from an arab perspective.