Crude Oil – A workers' strike in Nigeria and a plummeting dollar have led to higher petroleum prices in overnight trading. Militant attacks have already disrupted production by roughly 300,000 barrels a day in embattled Nigeria and the strike threatens to cut output by an additional 350,000 barrels a day. The U.S. Dollar, meanwhile, has given back a small portion of yesterday’s gains, helping to support Crude Oil prices in the early going. The market has largely shrugged off news that Saudi Arabia will be increasing production by 200,000 barrels a day, viewing it as a token gesture to appease U.S. politicians who have been lobbying the nation to open up the spigots. Supply disruptions have had much more of an impact on trading recently than any bearish news – such as the Saudi supply increase or China raising domestic fuel prices – underscoring the fact that this most recent rally has been driven largely by fear. These fears will likely continue given the current situation with Iran nearing a boiling point and the inability of Nigeria to get production back online. Technically, August Crude Oil continued to trade in a coiling congestion pattern on the chart, hinting at the possibility of an upside breakout on a new contract high close. Momentum is outpacing both price and RSI to the upside, adding to the bullish technical sentiment. Support comes in at 134.48, 132.22 and 130.39, while resistance can be found at 138.57, 140.40 and 142.66.
Gold – Precious metals started off the week on a sour note due to yesterday's sharp rally in the U.S. Dollar and heavy fund selling. The greenback has not been able to hold rallies beyond critical resistance areas but also has not suffered any significant setbacks, causing precious metals to remain in a holding pattern. If the Dollar is unable to gain any sort of upward traction in the coming days and weeks, it could embolden precious metal bulls on the thinking that the Fed will not be able to stave off inflation, at least in the near term. Heavy selling yesterday by funds was mainly due to the inability of the market to rally beyond near-term resistance. Given the economic conditions in the U.S. pointing toward stagflation and strong physical buying in the cash market, prices figure to find ample support north of the $850 area. That being said, the market may become vulnerable if the Fed is able to moderate inflation and/or energy prices somehow cool. August Gold has not been able to find a clear direction of late as stout near-term support and resistance areas have caused prices to ping-pong back and forth. Momentum has outpaced the RSI, suggesting a near-term positive bias. Support comes in at 873.20, 859.20 and 840.90, while resistance can be found at 905.50, 923.70 and 937.80.
Corn – Corn prices are lower overnight on dryer weather across much of the Midwest. Flood waters have yet to recede, but the dryer weather suggests that the worst has passed and growing conditions for some farmers will have improved when all is said and done. On the flip side, little is known about current crop conditions, as many of the flooded farmlands near the Mississippi River remain inaccessible. The floods may actually be a blessing in disguise for some farmers, as yields and crop quality may improve. December Corn remains within a stone’s throw of all-time highs, failing to suffer any major technical setbacks. Momentum and prices have leveled off in recent sessions, giving traders little in the way of near-term direction. Support comes in at 744, 729 and 720, while resistance can be found at 768, 776.50 and 791.25.
Rob Kurzatkowski, Commodity Analyst