Phil Flynn: Crude Oil, Wheat, And Global Economic Games

Are you looking for an exit strategy from the historic amount of economic stimulus and quantitative easing that has dominated global stock and commodity markets? Well look no further than Europe. While we here in the United States are raising the possibility of more quantitative easing and more ways to stimulate the economy, the President of the European Central Bank Jean Claude Trichet is sending signals he is looking for a way out. Yes, I know. It’s crazy! The EU and its three freaking pillars were on the verge of crumbling into pillars of dust just months ago.

Now EU growth is improving and even Greece passed the EU stress test and now Mr. Trichet seems to be stopping just short of flying a “mission accomplished” banner. Of course Jean-Claude, ever the optimist, said not long ago that people were just too darn negative on the EU and now he seems to be saying get ready to start the long road back to economic normalization. The US on the other hand, has Fed Governors talking about Japanese style Deflation.....Read the entire article.

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Crude Oil Is Set for a Second Weekly Gain on Economic Recovery Optimism

Crude oil is poised for a second weekly gain as concern over a Greek default subsided and stronger than estimated retail sales in the U.S., the world’s biggest energy user, bolstered optimism of an economic recovery. Oil rose for the first time in three days as March sales at 31 chain stores gained 9 percent, the largest one month increase since March 1999, the New York based International Council of Shopping Centers said yesterday. U.S. oil refineries raised operating rates to 84.5 percent of capacity last week, a six month high, the Energy Department reported on April 7.

“We saw some fairly encouraging retail sales data in the U.S. and that seemed to buoy market sentiment,” said Toby Hassall, a research analyst at CWA Global Markets Pty in Sydney. “It’s the latest in a string of encouraging macro data.” Crude oil for May delivery rose as much as 44 cents, or 0.5 percent, to $85.83 a barrel in electronic trading on the New York Mercantile Exchange. It was at $85.74 at 1:15 p.m. Singapore time. The contract is poised for a 1 percent gain this week, after climbing 6.1 percent last week. Futures have increased 8 percent this year.

Prices declined yesterday amid speculation Greece may default. The euro came within a cent of its weakest against the dollar in 11 months before erasing losses after Greece’s finance ministry said the country’s first-quarter budget deficit narrowed. European Central Bank President Jean-Claude Trichet said a default is “not an issue.”
Oil surged for six days to April 6, the longest rally in three months, following reports that showed growth in U.S. jobs and service industries.....Read the entire article.

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Phil Flynn: Jean Claude Trichet to Save the Day!

Wild ranges and a lot of action!

After it was all said and done, we basically ended up where we started. Oil prices were once again just a pawn of the foreign exchange market as the EURO started the day absolutely getting crushed over the Greek debt crisis. The Financial Times points out that the Euro hit the lowest level against the Swiss franc since the Euro came into existence in 1999. The Wall Street Journal said that the euro started the trading day on a weak footing after German Chancellor Angela Merkel ruled out discussion of an aid package for Greece when European leaders gather at a meeting scheduled for Thursday and Friday. The currency dropped as low as $1.3463 after Greece Deputy Prime Minister Theodore Pangalos warned that the integrity of the euro zone could suffer should EU leaders fail to support Greece. The dollar became safe haven fodder and the commodities got hammered.

It looked like the risk trade was getting ready to collapse before European Central Bank Chairman Jean Claude Trichet stepped in to save the day. Well at the very least he stepped in to save the Euro.
Jean Claude said that Greece was courageous. Did he say courageous? Yep, that's what he said. Dow Jones reported that austerity measures adopted by the Greek government to slash its budget deficit are "convincing and courageous. Participants in financial markets will eventually recognize this as well, said Trichet, who repeated that the notion of a country leaving the euro zone was absurd. The single currency is not a la carte, "We share a destiny in common." Well market participants seemed pleased and the euro reversed course. That brought the oil back as well reversing its earlier sharp gains adding more excitement to the expiration to the April crude futures. For bulls and bears, the moves can be maddening unless you realize that oil is just in a range. I have been saying for months that oil is in a big trading range and will eventually break out on the downside. Yet as the outlook for US interest rate being still in that low for an extended period language the range goes on.

It appears that I am not the only one who feels this way. Dow Jones Newswires reports that The International Energy Agency said, “Oil price risks are skewed toward the downside, but prices will most likely drift in their recent range for the rest of the year", quoting International Energy Agency Deputy Executive Director Richard Jones. He said that the price outlook hinges on oil demand growth and, "our prognosis is that there won't be many." But eventually, in the next three to four years, new oil production, particularly from Brazil and West Africa, will weigh on prices. As far as that production goes Dow Jones says that, “The first of three floating production, storage and offloading vessels is due to start producing from Ghana's 700 million barrels of oil equivalent Jubilee field before the end this year at a maximum capacity of 120,000 barrels a day", Tullow Oil PLC's (TLW.LN) Chief Operating Officer Paul McDade said earlier this month.

Brazil's Tupi field holds an estimated 5 billion to 8 billion barrels of recoverable reserves. The initial development phase is expected to commence in late 2010, with initial production of up to 100 000 barrels a day, BG Group, which has a 25% share of Tupi, said on its Web site. Jones told Dow that a recovery in U.S. oil demand so far hasn't been strong. While there have been some encouraging signs of growth, energy intensity per GDP unit in the U.S. have dropped. Growth may not come back as strong as it was prior to the economic downturn, Jones said.

Instead of cursing the trading range, just play it! Buying oil or selling oil at the extreme ranges of the daily charts has been very profitable. Try to take into account volatility as well as the fundamental outlook and adjust accordingly. Yesterday could have been a banner day yet if you are stubborn with a bullish or bearish ideology you may be missing the boat.

You can contact analyst Phil Flynn at pflynn@pfgbest.com You can also see Phil on Fox Business Network every day.

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Crude Oil Declines on Forecast for Higher U.S. Supplies, Stronger Dollar

Crude oil fluctuated as the Standard & Poor’s 500 Index erased gains and the dollar increased against the euro. Oil climbed as much as 0.7 percent earlier today when the S&P 500 advanced above its March 17 close, the highest in 18 months. Futures dropped earlier when the greenback appreciated on skepticism European Union leaders will agree on an aid package for Greece this week. A stronger dollar reduces the investment appeal of commodities.

“All we are doing is chasing the S&P,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “Traders have been trained to look at the correlation between the S&P and oil.” Crude oil for May delivery rose 6 cents to $81.66 a barrel at 11:15 a.m. on the New York Mercantile Exchange. Prices are up 2.9 percent this year. The S&P 500 declined 0.13 point to 1,165.68, after climbing as much as 3.61 points, or 0.3 percent, to 1,169.42.

The dollar traded at $1.3537 per euro, up 0.2 percent from $1.3558 yesterday. The greenback was up 0.6 percent earlier today. The euro weakened versus 12 of 16 major counterparts after European Central Bank President Jean-Claude Trichet spoke out against offering low interest loans to Greece.

Oil prices have remained within a $68 to $84 a barrel range since October, and have traded between $77.05 and $83.16 over the past month. “We’re finding out the market can’t move too far above $80 before running into resistance,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “There will have to be evidence of increasing demand or a geopolitical crisis to push prices above $83”.....Read the entire article.


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Crude Oil Drops to Lowest Price in Almost Three Weeks as Dollar Advances

Crude oil fluctuated as the dollar weakened, increasing the appeal of commodities as an alternative investment, and gasoline fell. Oil erased earlier declines after European Central Bank President Jean-Claude Trichet said he doesn’t expect further downgrades of Greece’s credit ratings, reducing the value of the dollar. Gasoline prices fell 0.5 percent.

“Crude is responding more to movements in the foreign exchange markets than anything else,” said Jason Schenker, president of energy consultants Prestige Economics in Austin, Texas. Crude oil for April delivery rose 17 cents to $80.85 a barrel at 12:37 p.m. on the New York Mercantile Exchange. Earlier, it touched $78.57, the lowest price since March 2. Futures have climbed 50 percent in the past year.

April futures expire at the close of Nymex floor trading today. The more active May contract gained 18 cents to $81.15 a barrel. Oil dropped as much as 2.6 percent earlier today and the U.S. currency rose to the highest level since March 2 after German Chancellor Angela Merkel said investors shouldn’t expect a European Union summit this week to agree on aid for Greece.

The dollar weakened 0.2 percent against the euro to $1.3556 from $1.3530 March 19. Earlier, it touched $1.3464. The currency has strengthened 1.5 percent since March 12. “When the dollar’s strong, the bears in the oil market come out,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The oil markets had a second test last week of $83 and failed to break through, so they’ve peeled back”.....Read the entire article.

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Crude Oil Falls From 7 Week High as Dollar's Gain Reduces Appeal of Commodities

Crude oil fell as the dollar climbed the most against the euro in two weeks, reducing the appeal of commodities as an alternative investment. Oil slipped as much as 1.4 percent on the greenback’s advance after European Central Bank President Jean-Claude Trichet kept its benchmark interest rate unchanged and extended some stimulus measures to cement the economic recovery. Prices also dropped as a report showed that the number of contracts to buy previously owned homes in the U.S. declined in January.

“The dollar has been gaining strength, which is having an impact on the energy markets,” said Tom Bentz, a broker at BNP Paribas Commodity Futures Inc. in New York. “We had some bad home sales data, which seems to also be sending prices lower.” Crude oil for April delivery fell 74 cents, or 0.9 percent, to $80.13 a barrel at 10:30 a.m. on the New York Mercantile Exchange. The contract rose 1.5 percent to $80.87 yesterday, the highest settlement level since Jan. 11.

Brent crude oil for April delivery declined 83 cents, or 1.1 percent, to $78.42 a barrel on the London-based ICE Futures Europe exchange. The dollar traded at $1.3595 per euro, up 0.8 percent from $1.3697 yesterday. The greenback is heading for the biggest gain since Feb. 17. An index of home purchase agreements, or pending home sales, fell 7.6 percent after a revised 0.8 percent increase in December, the National Association of Realtors announced today in Washington.....Read the entire article.


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Crude Oil Falls a Second Day as Dollar Gains, Equities Drop

Crude oil fell for a second day as the dollar strengthened against the euro and global equity markets declined. Oil slipped as much as 1.6 percent as the U.S. currency advanced for the third time in four days. Stocks and equity futures retreated after European Central Bank President Jean-Claude Trichet said policy makers will withdraw emergency cash gradually to avoid fueling inflation, and Dell Inc.’s earnings trailed analysts’ estimates.

“We will take oil prices down another notch because of the strengthening dollar,” said Jim Ritterbusch, president of Ritterbusch & Associates, a Galena, Illinois, consultant. “Things are bearish everywhere you look.” Crude oil for December delivery fell $1.20, or 1.6 percent, to $76.26 a barrel at 9:11 a.m. on the New York Mercantile Exchange. Prices are little changed this week and 71 percent higher this year. The December contract expires today. The more actively traded January contract fell $1.09, or 1.4 percent, to $76.96 a barrel. Oil dropped 2.7 percent yesterday as the greenback gained and on concern the rally in commodities and equities has outpaced the prospects for economic growth.....Read the entire article.

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