Crude Briefly Flirts with the Century Mark
Crude Oil – Oil futures started off the New Year with a bang, with prices eclipsing the intraday $100 mark for the first time. Geopolitical tensions rocked the market early and the ISM manufacturing report showed an inflationary prices paid component, which was the driving force after the NYMEX floor open. Supply concerns were very much on the minds of traders, and are likely to spill over into today’s trading as well. Looking at the newswires, several major financial publications reported that global petroleum supplies have reached a peak, meaning the world has used half of the petroleum on the planet. The stories only acted to spur on an already emotional trading session. Commodities were higher in general on inflation worries, with Feeder Cattle, Sugar and Coffee the only markets to take a pass on the rally. Today’s trading figures to be very volatile with the release of the EIA petroleum inventory numbers, which are expected to show a decline of 1.8 million barrels for the week. The enthusiasm over the cold blast hitting much of the eastern portion of the country may dissipate given the warmer forecast for the winter as a whole. The slowdown indicated in the ISM manufacturing number may give some traders cause for a retreat, as it showed a larger-than-expected drop in manufacturing activity, but at the same time showed inflationary pressure. This could lead to a pause in the Fed’s recent wave of rate cuts. February Crude had a technical breakout, closing above previous contract highs of 98.12, and traders will look for the market to establish further closes above this area to confirm the breakout. The market remains very overbought, registering 92.67 percent on the RSI. Support comes in at 97.18 and 94.73, while resistance may be found at 100.94 and 102.25.
Soybeans – The grain markets jumped sharply on news that the Chinese government will be imposing hefty duties on exports of grains in an effort to bolster domestic reserves. The protectionist move will likely lead to even stronger U.S. export demand and pressure already tight global stocks. Adding to supply squeeze, the recent upswing in petroleum prices is expected to spur more bio-fuel demand. On the weather front, the La Nina patterns strengthened, opening the door for hot, dry conditions across the Midwest this crop year. The Bean market may be susceptible to profit-taking pressure in the near-term after rallying sharply over the past few trading sessions. The March Bean chart remains bullish with yesterday’s breakout above previous contract highs. The RSI is registering an overbought reading, opening the door for profit-taking. Momentum continues to outpace RSI, leading to a positive short-term bias. Support comes in at 1225.50 and 1202.50, while resistance can be found at 1267.25 and 1285.75.
Orange Juice – Freezing temperatures across Florida’s citrus-growing region sparked yesterday’s OJ rally. Traders will be closely monitoring the length of time that temperatures remain below the freezing point. Six hours is generally viewed as the breaking point, with frosts lasting longer generally causing significant damage. Even if the weather fears evaporate over the next day or so, the market may benefit from the overall bullish sentiment in physical commodities. On the other hand, traders may be tempted to simply dump Juice contracts if the weather warms, preferring to jump into one a booming market like energies or precious metals. March FCOJ was unable to hold early day rallies and, as a result, formed a spinning top formation on the daily chart. Momentum continues to outpace RSI, suggesting that the short-term bias is moderately bullish. Support comes in at 145.05 and 141.30, while resistance can be found at 152.25 and 155.75.
Rob Kurzatkowski, Commodity Analyst
