Crude $120?
Crude Oil – Oil prices reached a new milestone in early trading, briefly breaking through the $118 mark for a barrel. Shell Nigerian operations were disrupted due to stepped up attacks on pipelines – the Oil giant indicated that the attacks have reduced production by 169,000 barrels a day. Further bolstering prices, the union at a Scottish refinery in Grangemouth has threatened to strike, which could further put the squeeze on UK supplies. The Dollar is also trading lower against most of the majors, helping to support higher price levels. Oil fundamentals remain bullish ahead of the official start of the driving season. While demand has been lackluster, gasoline supplies remain somewhat tight at the moment, with analysts forecasting tomorrow's EIA number to show another drawdown in inventories. The daily Crude chart remains bullish, but the market is now in technically overbought conditions, which could spark some profit-taking later this week. Momentum has moved lower this morning – despite the market being higher – suggesting the trend may be weakening in the short term. Support for the June contract comes in at 115.42, 114.21 and 113.41, while resistance can be found at 117.43, 118.23 and 119.44.
Gold – Gold prices are slightly higher this morning on a weak greenback, but prices for the precious metal are well off of overnight highs. The Gold market has not been able to mount a sustained rally after reversing sharply from all-time highs. It looks as though some money has flowed back into the equity markets and that energies have stolen Gold's thunder. The inability of food commodities to hold rallies and worries that the Fed may address the inflation issues facing the U.S. have tarnished the appeal of precious metals as an investment vehicle. Next week's policy statement from the FOMC looms very large for the metal prices, with mentions of inflation and/or restrained rate cuts being bearish for prices. The June Gold chart shows a coiling congestion pattern, which points to a great degree of indecision among traders. The recent failure to make a run at late-March highs can be seen as bearish. Since the mid-March breakdown, momentum has not been able to get above the zero line, indicating sluggish conditions. Support comes in at 91.40, 903.30 and 892.50, while resistance can be found at 928.30, 939.10 and 946.20.
Rough Rice – Rice futures continue to trade near record high prices on slow planting progress. Vietnam, China, Egypt and several other large rice producers made efforts to reduce exports, which has helped fuel this run-up in prices. Thailand, the world's largest exporter of the grain, has decided against curbing exports, stating that high prices will curb demand and eventually lead to stable prices. Thai officials indicated that they see exports falling as much as 30 percent by the end of the year due to the high prices. Rice is in the midst of a short-term supply squeeze similar to Wheat, which may result in increased plantings in the future. While fundamentals remain bullish at the moment, increased U.S. plantings could put some major downside pressure on prices if the weather cooperates. The July Rice chart remains bullish, but two consecutive spinning top patterns may be a sign that the market may be reversing course or consolidating in the near term. Momentum continues to move lower, even though the market is up in overnight trading, suggesting this booming commodity may have chinks in its armor. Support comes in at 23.21, 22.72 and 22.01, while resistance can be found at 24.40, 25.11 and 25.60.
Rob Kurzatkowski, Commodity Analyst
