The market appears as though it will trade to the downside in the near-term thanks to Monday’s break of key channel support and due to the inability to maintain rallies. Pressure may also come from a lack of progress in fiscal cliff talks, the potential that OPEC leaves production unchanged at today’s meeting, building levels of U.S. gasoline stocks, and high levels of U.S. oil production.
U.S. stock indexes printed small gains yesterday as market participants begin to focus on the two day Federal Reserve meeting. Analysts are looking for policymakers to provide further monetary stimulus – QE4? However, the Fed watchers will also be watching for any signs of deal or lack of deal concerning the fiscal cliff.
Energy Price Outlook Oil prices may trade lower in the near-term, as Monday’s action failed to respond to moderately favorable developments. There was support for yesterday’s trade given by the bottom of a rising channel pattern at $86.20 and from a recovery in economic data from China and Germany. However, an uninspiring trade in the stock market and a lack of progress in fiscal cliff talks added on to other
The overnight markets are all over the place, most recently collapsing from 7-8CST with beans trading down more than double digits. The meal has quickly lost $3-4, oil remains 20-30 points lower, corn is melting trading down 5-6 and wheat has drifted lower trading down 4-5 cents.
U.S. markets are coming off a meager up week with the Dow Jones and S&P 500 closes the in the green the last 3 session prior to the weekend. The NASDAQ, however, is having difficulties with its largest component Apple (AAPL, quote) continues to struggle.
This week’s trade in energies could see a mixed trend overall, but selling rallies may still be the most attractive trade at the moment. WTI will find key resistance at the 50-day moving average at $88.20 while strong support will be at the bottom of a bullish flag pattern at $86.20. A busy week is in store, as the weekend’s Chinese economic and trade data will be digested on Monday.
Natural Gas traded lower settling $3.666, down $0.034 (0.9%). The curve was weaker, 13/16 down $0.03. Hub cash was weaker, ~$0.20 back this morning, Z-6 down $0.40 to $3.90 as temps are running 10-15 above normal in major Northeast/Midwestern cities through Monday.
The oil market is a tough call today and could potentially rebound amid channel line support and today’s non-farm payroll report. The channel offers support at $86.10/bbl in WTI, while we think that the payroll report could be spun favorably even if it misses estimates due to superstorm Sandy.
The overnight market have once again shown some signs of life in the soy-complex as this market seems to be the only market that has global interest. The beans as of 8CST are trading +6-9, meal gained $1.50-2, oil increased by 25-30 points, corn is virtually unchanged…again and wheat is up 2-3.
Oil prices may fall slightly in the near-term, as pressure is offered by technical factors and the lack of progress in fiscal cliff negotiations. Background pressure will come from next week’s OPEC meeting where quotas are expected to be left unchanged, and from the growing amount of U.S. oil production.
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