Good morning,
DXM9 96.79 -0.212 GCM9 1303.5 +7.9 ESM9 2893.00 -3.00 CLK9 63.30 +0.22
There’s a bit of risk off sentiment in the markets this morning to begin the week, with gold back above $1300 and oil continuing to trade firm after Friday’s rally which took prices through key resistance areas. Geopolitical concerns are behind today’s strength in oil, as there are supply concerns in Libya as there is fighting taking place outside of Tripoli.
Friday’s oil markets had a good bid, with Brent crude trading well above $70 and WTI moving above $63. News that Russia will cut its oil output (ex production and sharing agreement) by 225k barrels in April vs October production levels. Oil also received a boost on Friday on news that the US is weighing more sanctions against Venezuela, as it was reported Venezuela is exporting fuel oil despite US sanctions. As mentioned, fighting between the Libyan government and forces of Khalifa Haftar outside of Tripoli threatens oil production in Libya. Friday afternoon, the Commitment of Traders report from the CFTC showed long positions in WTI rose by 6,602, to 244,807. Longs in Brent crude rose by 26,625 to 348,660.
The grain markets were lower on Friday, as the markets continue to mark time ahead of tomorrow’s WASDE report from the USDA, where increases to reported inventories are expected (estimates can be found on the attached document). Even with the lower prices, there was very large short covering taking place in corn, as open interest declined by almost 40k. Wheat also saw some short covering, with OI declining over 10k. Friday afternoon, the COT report for grains showed spec shorts in corn rising to a record 269.8k. Soybean spec shorts were -91.7k and wheat shorts were -86.7k. These numbers are compiled as of last Tuesday, and there was some covering taking place over the remainder of the week. After the WASDE prints tomorrow, and the market digests the data, the market will return to focusing on the weather, where conditions will be monitored, looking for potential delays to planting.
The lean hogs market staved off some early weakness in prices. Most likely profit taking after a very strong week which saw the market go limit bid on 2 different days. Hog prices did find some support and rally into the close. Supply concerns with Swine Flu continue to support the market. The COT report showed funds spec long 48.7k lean hogs. The report showed live cattle with a spec long position of 120.3k. Cattle finished lower on Friday, and this large long position possible could weigh on prices.
Sugar prices traded at a 2 week high on Friday. The Brazilian real steadying against the dollar supported prices. Sugar also received support from the rising oil prices, as it may boost the prospects for cane based ethanol in Brazil. The COT report showed funds spec short 114.1k contracts. Cocoa was higher again, with the longest rally to prices observed in the past 4 years. West African supplies, due to hot and dry weather, remain the catalyst. The COT report showed spec shorts at 45.5k. The COT report for coffee showed spec shorts at 77.3k. Good weather conditions for growing in Vietnam is keeping some pressure on prices. Cotton was up on Friday, trading at a 15 week high. Optimism on export sales keeping a bid to cotton prices. The COT report showed funds spec long 9.2k.
As mentioned, gold is firm today, as geopolitical tensions in Libya and global equity markets being lower provides a bid. The dollar is also lower today, which tends to support gold prices. Copper is higher today, after trading down on Friday. Platinum had its biggest weekly rally in 2 years last week, as there continues to be a thought that car manufacturers will switch to using platinum instead of palladium. The is also a labor disruption in South Africa which is supporting the market.
Data today includes export inspections for grains, along with crop conditions this afternoon. Factory Orders and Durable Goods are on the main economic reports today. Tomorrow brings the WASDE report from the USDA, and Wednesday gives a look at US inflation with the CPI report.
Have a good day,
Mike
Mike Clifford
312 604 6404