28th July 2011
Commodity Overview
Focus on Oil

WTI Oil futures have traded around the highs of the July trading range over the past few sessions and we have broken the $100.00 mark on a few occasions though have failed to close above here as yet.
Thoughts from the trading floor

On Wednesday the API figures showed a large build in Oil inventories at 3960k and a small draw down in Gasoline stocks of 639k barrels. The DOE figures both showed relatively large builds last night at 2296k for the Oil and 1022k for the Gasoline. The market moved down on these figures initially but then recovered later in the session. We are now trading around the same area after the initial sell off yesterday.
The Oil market has been relatively quiet over the past few sessions though we have remained near the highs of the July trading range. Having broken the $100.00 mark on both Thursday and Friday, and again on Tuesday we would have expected some follow through to the upside but this has not materialised. The market has failed to close above here with sellers coming in on each occasion. Tuesday’s high of $100.62 is now short term resistance before the bigger level at $101.25. The market has since sold off since Tuesday and is currently trading around the small level at $97.75. To the downside, the key areas will be $95.70-90. If the market can hold and remain above these levels then expect to see another test of the recent high. A break below here however and we should see some longs start to cover, though there is support seen at $94.40-60 as well as the July double bottom at $93.50.
It seems strange to us that the markets in general appear not to be too worried about the potential of the US defaulting on it’s debt and being downgraded by the major rating’s agencies. In our view the markets seem to assume something will be done and while we expect some sort of agreement to be made over the coming days, it doesn’t seem that the parties are going to negotiate a deal that solves the problem in the long term. If any deal falls short of market expectations, or more shockingly, no deal is made at all, then expect risk markets to really take a hit. Any big news on this front will likely lead to some larger than usual moves and the technicals will become less prominent.

Bull View

The bulls made a break higher last week but have failed to capitalise on those gains. They will target another break of the $100.00 level and look to close above here, targeting $100.60 first and then $101.25.
Bear View

The bears defended the $100.00 level, preventing a close on each occasion that it broke and have since soled the market down to the level at $97.75. The key will be to test the $95.70-90 level over the coming sessions.
Futex View
Assuming there is some sort of agreement made over the US debt ceiling, we favour another test of the recent highs at $100.60 and on to $101.25.

20th July 2011
Commodity Overview
Focus on Oil

WTI Oil futures have remained relatively range bound over the past few sessions as a lack of news has prevented the market from moving in any real direction. The volume has rolled to the September contract and so we will now be quoting this contract from here on in.
Thoughts from the trading floor

The past few sessions have been relatively quiet for WTI Oil futures with the lack of a dominant theme in the market taking play. Last week we had Fed chairmen Ben Bernanke first suggest that more QE was on the way before appearing to retract that opinion the very next day. This resulted in a bid into risk assets before mainly selling off again. There are still doubts over the peripherals in Europe but the serious fears seem to have subsided for now which has led to Oil climbing back towards the top of its range during yesterday’s session.
Technically the the $99.25-40 area is providing resistance for the market and marks the top of the recent range - one we have been trading in since the beginning of July. This area will need to break and close above before we see a move higher and the $100.00 will obviously be eyed first. If we begin to trade back above here the longer term sentiment may begin to turn again. Resistance above here lies at $101.25 and $102.00. To the downside the daily double bottom this month at $93.50 marks the low of the trading range and is key support. Just above here there is also support in the $94.20-60 area. It would take something major to get the market back down here over the next few sessions but these areas should provide buying opportunities.
Last night’s API showed a huge draw down of 5179k in Oil stocks. This compares with the DOE estimates of a draw down of 2000k. The Gasoline showed a build of 1957k barrels, compared with the DOE estimates for a draw of 250k barrels. The API numbers were mixed but if we see these readings mirrored in the DOE release we expect to see more upside pressure in the Oil.
Bull View

The market is trading above the $97.75 level and as long as we see a close above here the bulls will target the recent highs made at $99.25 and $99.40.
Bear View

The bears will need to defend the recent highs if we get there as a break could see increased upward pressure. A move back and close below $97.75 should see $96.30 targeted at the least.
Futex View
We still favour trading the July range until it breaks as we have yet to see any real direction in the market. In the medium we are turning slightly bullish and a break above $100.00 should see some weak shorts covering, with a move to $101.25 at least.

6th July 2011
Commodity Overview
Focus on Oil

After a quiet few days over the Independence Day weekend WTI Oil futures bounced yesterday, breaking resistance at $95.70-80 for the first time in three weeks and touching the $97.75 level in the Asian session.
Thoughts from the trading floor

Volumes have been low over the past few days owing mainly to the Independence day holiday in America on Monday. As a result, markets in general have been largely subdued and Oil was quiet after failing to break the recent highs around $95.70-80 last week. WTI Oil bounced yesterday though with traders returning to the market as commodities were bid across the board and equities remained near or through their recent highs. A break through the $95.70-80 level led to more buying and we touched the $97.75 level in overnight Asian trade before backing off this morning.
Risk markets have generally been on the back foot this morning as some covering of recent longs takes play following Moody’s downgrading of Portugal last night and as we get closer to the all important NFP release on Friday. This is likely to be as important for the Oil market as it is for equities and bonds as traders look for signs the US recovery can continue without QE from the Fed. A strong number is likely to lead to more upward pressure in Oil and levels to look for to the upside are $97.75 and $99.60.
The important pivot point for the market is now the $95.70-80 level that we broke yesterday. The market will maintain a bullish stance so long as we remain above here. A break back below however and could lead to week longs covering and further pressure to the downside. Short term support below here lies at $93.40 and around the $92.00 handle. Due to the Independence Day holiday the API and DOE releases are pushed back a day. Last week’s API showed a draw down of 2699k barrels and a draw down in Gasoline of 91k barrels. The DOE estimates for Crude and Gasoline stocks are -2500k and a build of 1000k respectively.
Bull View

The bulls have control again after breaching the $95.70-80 level and have taken the market as high as $97.80. They will need to retest here again before looking higher, possibly to $99.60.
Bear View

The bears need the market back below the pivot level at $95.70-80 to gain back momentum. Below here the first target is $93.40.
Futex View
The markets may be quiet going into Friday’s NFP release which will be important for the market. Until then look to sell up to $97.75 with a target being the retest of $95.70-80.

29th June 2011
Commodity Overview
Focus on Oil

WTI Oil futures have traded lower since last Wednesday and have tested $89.60-80 to the downside three times this week but bounced yesterday as an appetite for risk markets across the board increased with expectation that the Greek government will vote to pass the austerity measures later today.
Thoughts from the trading floor

The big news since we last visited Oil was the statement made last Thursday by the IEA that they would be releasing 60 million barrels from it’s strategic reserve in a bid to combat the supply issue that have resulted from the continued conflict in Libya. This sent WTI Oil sharply lower in the time leading up to and after the announcement as the market tested $89.70 and showed a drop of over $5 on the day at one point. Putting this release of reserves into context the US uses over 20 million barrels per day. So while the move came as a shock (this is only the third time the IEA has ever released strategic reserve barrels) the total amount shouldn’t have too much of an impact in the long run. Unless however, it provokes a reaction from the OPEC countries. Iran, currently heading up OPEC, has already condemned the move and the biggest risk is that they come out and respond with a corresponding cut in production. These fundamental news events will obviously take precedent going forward over technical levels and can create larger than expected moves on a daily basis.
Currently though, the key level in the market is $94.60 to the upside and then $95.60. These two levels have held on retests numerous times since the break lower last week and still remain key resistance. A break through these and further short covering should lead to a move back towards $96.30-60 and then $97.70. To the downside $89.60 has proved key support this week but below here $87.20-60 is further support. Last night the API reported large draw down in Crude stocks of 2699k barrels, compared to the DOE estimate of a draw down of 1500k. Gasoline showed a draw down of 91k, compared with the DOE estimate of a build of 775k.
Bull View

The bulls need the market back above $96.50 if they are to really take control again and will need the $89.60 level to remain the low in the market going forward..
Bear View

After breaking lower again this week the bears remain in control. Important areas to defend are $94.60 and $95.60 with a view to retesting the lows made earlier this week.
Futex View
We are still bearish in the medium term but could see some further bounces in the short term if the risk appetite remains in the markets after the Greek vote today. We will look to sell bounces up to $96.75.

22nd June 2011
Commodity Overview
Focus on Oil

WTI Oil futures have now rolled to the August contract and we will be quoting figures from this contract from here on in. WTI Oil dropped this past week after finally breaking support at $95.00-50 last Wednesday. Since then we have remained below this level and have tested the $92.00 level, breaking down to $91.50 before bouncing back.

Thoughts from the trading floor

Oil finally broke the important $95.00-50 level last week and moved lower still as traders covered longs that were leaning on this level for support. The low made on Monday at $91.50 marks short term support and is just below the $92.00 level that supported the market back in January. A break below here should see a new wave of selling as the range we found ourselves in for the majority of May and early June take the form of a flag at the base of the rout that took place in commodities in early May. A longer term target for this technical move would be $83.00 though the market should attract buyers at the $90.00 and $87.00 levels before here.
What makes the Oil look so bearish is the price action in recent days when compared with that of the equities - markets that have been closely correlated recently. As the equity markets have bounced off their recent lows, namely in anticipation of the Greek government surviving a vote of confidence, WTI Oil has remained under selling pressure. This has also come in the face of Brent Oil, among other commodities, remaining more resilient. In the short term the upside level of $94.65, the low made on the second day of the commodity rout, held yesterday and remains the first level of resistance. Above here the more important levels are the $95.00-50 area and then the daily flag re-test which currently lies at $96.50. If the market can make a bounce back above here expect to see some more short covering.

Last night the API reported small draw down in Crude stocks of 81k barrels, compared to the DOE estimate of a draw down of 1825k. Gasoline showed a draw down of 1516k, compared with the DOE estimate of a build of 1000k. The close today after the number could be key so look for whether the number creates sentiment going into the close of the day.

Bull View

The bulls need the market back above $96.50 if they are to really take control again but defending the $91.50-92.50 area is key going forward.
Bear View

Strong week for the bears and they will look to make another re-test of the low made on Monday at $91.50. A break below here and another wave of selling should ensue. $94.65 is the first level to defend to the upside and may cause some week shorts to cover if we moveb back above here.
Futex View
After the market broke the important range to the downside we are bearish in the short to medium term. We would look to sell any bounces up to $94.65 and $96.50 with a short term target of the recent lows.

15th June 2011
Commodity Overview
Focus on Oil

WTI Oil futures have moved around a fair bit this week though have stayed within the broader range we have seen since early May. This has been the general picture across the commodities which have tended to follow equities over the last few days in a general risk on/off trade.

Thoughts from the trading floor

Oil has remained within it’s trading range this week though we have seen the July contract test close to both the recent highs and lows. After popping through the $102.00 handle on Thursday Oil sold off down to just below the $96.30 level on Monday, making a low at $96.13. We bounced again from here though and are trading around $98.70 this morning. The volatility recently has coincided with the equity market sell-off and subsequent bounce on Tuesday in a general risk-on/off trade across most asset classes. It also shows that there is still no strong sentiment in the market. As we approach the key resistance levels the bears come in and take the market back down towards the low of the trading range but can’t keep the momentum going to make a break lower.
Technically then, we are still in the wide trading range of the past six weeks of $95.00 to $105.00. Key support and resistance levels continue to hold and a meaningful break in either direction is still yet to take shape. To the downside major support lies at $95.50 but $96.30 has also attracted buyers before here. The first resistance level is at $99.60 which proved strong yesterday. A break through here and we expect to test the $101.25 handle again. Through here $102.00 and $103.40 should also act as resistance to the market. We may see Oil continue to follow the equity markets as they respond to news coming out of the Eurozone about the sovereign debt crises which fails to go away.
Last night the API reported another huge draw down in Crude stocks of 3029k barrels, compared to the DOE estimate of a draw down of 1800k. Gasoline showed a build of 1126k, compared with the DOE estimate of a build of 1050k. If we continue to see large draw downs in the Crude stocks we could start to see the market make more bullish moves as worries start to creep in about the lack of supply in the market.

Bull View

The bulls managed to defend the lows of the trading range this week with an impressive bounce and will look to take the market back through the $100.00 mark this week.
Bear View

The bears managed to test the lows again this week but failed to break them and we have since seen the market trade back towards $99.60. Key will be to keep the market below $101.25 and especially $102.00
Futex View
While the market fails to break the lows we still favour the market testing $105.00 again in the medium term, and possibly $109.00. For now though, trade the range between $95.50 and $101.25-102.00 while the market continues to make up it’s mind about where to go from here.

25th May 2011
Commodity Overview
Focus on Oil

WTI Crude Light Oil futures have been range bound all week with the July contract failing to make a meaningful break in either direction. This past week has seen the market touch the $101.25 level to the upside before selling off and found support at $96.30.
Thoughts from the trading floor

From a technical perspective the short term outlook for WTI remains uncertain. As we continue to trade between $95.00 and $101.25 there is no real case to be made for a move in either direction. In the past fifteen days we have left six daily lows between $94.80 and $96.40. This is obvious support and if the market can make a meaningful break of these levels then a further move lower is surely on the cards. At the moment on the daily chart the market seems to be building a long term bearish flag and the target of this, should the recent lows break would be way down around $75.50. We do not expect the market to fall this low but a break and close lower than $94.00 should lead to another sell off, probably down to $89.00-$91.00. Interestingly, as Gold and Silver broke to the upside yesterday Oil failed to move through and close above the $100.00 handle. This could be down to it’s closer correlation to the equity markets, as they sold off yesterday, but highlights the possible weakness in the market.
If Oil cannot break lower though on further probes this week then there is obviously a case to be made that we are building a base around here. Goldman Sachs came out yesterday with a bullish stance on commodities stating that the better risk/reward at this point would be to be long. What Goldman say and what they do are entirely different things though and we always take their public offerings with a pinch of salt, especially as only at the beginning of the month they were advising going short both Brent and WTI Oil. But if $101.25 can be broken to the upside then we expect the $104.70 level to be tested once more. Today’s DOE numbers could finally put some momentum in to the market in one direction.
Last night the American Petroleum Institute reported a draw down of 860k barrels for Crude Oil, comparing with DOE estimates of a drop of 1500k barrels. The API Gasoline showed a large build of 2442k barrels compared with current estimates at the DOE of a build of just 450k barrels. Due to the recent volatility in the market these numbers could result in bigger moves than usual, and could give the market some momentum going forward.
Bull View

The bulls need to keep the market above $95.50 and form a base from here. A break and close through $100.00 would lead the way for a test of the $101.25. Above here the major level is $104.70.
Bear View

The bears will be happy having kept the market below $100.00 a barrel since the large sell off at the beginning of the month. As we build value at these lower levels they will look to again test the lows around $94.70-95.50. A break and lower close could lead to a more prolonged sell off. The first support below here is $91.25-92.00, and furthermore at $89.25.
Futex View

We remain cautious while the market continues to be range bound and wait for the market to make a meaningful break in either direction. For now, play the bigger range between $95.50 and $100-101.25 but with tight stops. A more substantial move could be around the corner so keep an eye on all commodities and the equity markets for clues as to which way the market may be leaning.

18th May 2011
Commodity Overview
Focus on Oil

WTI Crude Light Oil futures have traded lower since the middle of last week, but have failed to break through the recent low made at $94.64, with the $95.00 handle providing support on both Thursday and yesterday. The market has failed to close above $100.00 a barrel for four straight sessions now, and is trading around $98.50 this morning.
Thoughts from the trading floor

Last week we mentioned that the outlook for Oil was still relatively bullish, having seen the market bounce strongly for two days after the rout that took place across all commodities. The market failed to regain the important $106.00 level though and what followed was another big sell off with the June contract falling over $6 and since then the market has been relatively range bound between $95.00 and $100.00 a barrel. Technically the short term outlook is a little unclear and the next big move could be key to the market gaining some momentum in either direction.
In the last few sessions, like with the equity markets, Oil has made attempts at moving lower only for it to bounce sharply again as we approach support at $95.00-30. If the market can make a clean break of this area, and further through the recent low at $94.64 then $91.90-92.00 will be eyed to the downside. Below here $90.50 should provide further support. However, we have now left three significant tails on the daily candles and we could be building a base around the $95.00 level before another leg back up. Remember in April we made a triple daily bottom at $106.00 before eventually making new highs at $114.85. A similar pattern is emerging now and if the market can get up to last weeks highs around $104.60 then the $106.00 level is again in sight. A move above here would be particularly bullish after the recent price action.
Last night the American Petroleum Institute reported a large build of 2669k barrels for Crude Oil, comparing with DOE estimates of a build of 1700k barrels. The API Gasoline showed a small draw down of 676k barrels compared with current estimates at the DOE of a build of 950k barrels. Due to the recent volatility in the market these numbers could result in bigger moves than usual, and could give the market some momentum going forward.
Bull View

After three attempts to make new lows the market has failed at breaking $95.00 and has formed a base from which to move higher. The first target is to test $100.70 and then $104.60.
Bear View

Though the market continues to bounce from support at $95.00 we have not seen any significant moves up to stop the shorts out. Failure to close above $100.00 over the next few sessions could provide the market with the momentum to finally break through the recent lows. Below here $91.90 is a medium term target, and further $90.50.
Futex View

Having been bullish for most of the year we are now a little cautious to further up moves with the market failing to retake the $106.00 level when it had the momentum last week. Both equity markets and Oil have tried to break new lows recently but have failed on each occasion. If these levels do not break soon we expect the market to have another go at $104.70. Should the market move below here we could see an extended move lower to the low $90’s a barrel.

11th May 2011
Commodity Overview
Focus on Oil

WTI Crude Light Oil futures, along with all the commodities have had a pretty amazing week since the last time we focused on the contract. After making new highs at 114.83 on Monday we saw a huge liquidation in commodities across the board, with Oil touching 94.63 on Thursday, a move of fully 20 points in just three days. The June contract has since bounced back and is trading around 103.50 this morning, with some normality returning to the market.

Thoughts from the trading floor

It has been almost three years since we have seen anything like this in the Oil market. Although we had a $10 move to the upside in one day a few months ago in the wake of rising tensions in the Middle East, it is not since the financial crises hit that moves of this kind have been seen across multiple sessions. The CFTC have said they will launch an investigation into the reasons behind the moves, which also saw Silver drop 30% in just over a week. Until then, the reasons behind the move will not become fully apparent but it certainly seems to relate to the large speculative trades that have built up over recent months as Oil has enjoyed a steady, almost unabated rise above $100 a barrel. Many hedge funds have already announced the moves have cost them billions of dollars.
It would have been hard for traders to make any sense of the moves as they occurred last week, and levels in the market became completely irrelevant as stops were hit almost on a minute by minute basis at some times. Looking at the charts now after what seems to be the worst of the volatility, the market still remains relatively bullish on a technical outlook. It seems strange to say it after a $20 move to the downside but we are only $1 short of rebounding half of the move already. As we mentioned on Friday, the market needed to remain above $91.00-92.00 level to keep this long term outlook in tact. An impressive bounce from $93.63 means we are now trading above $100.00 a barrel again. The market remains vulnerable to fast moves both up and down though, with many participants still taking stock from last week’s moves.
The key for the market will be if it can regain the $106.00 handle. This was a triple daily bottom and though it provided little support during the rout, should form longer term support again if it is retaken to the upside. Any rejection here though and we could see the market back down to $102.00 or the $97.60-98.00 level. After the big moves of last week, the trading range may become a lot wider for the next few sessions and it may be wise to sit back and see how the market trades around just the big levels. Last night the American Petroleum Institute reported a large build of 2948k barrels, comparing with DOE estimates of a build of 1500k barrels. The API Gasoline showed a drawdown of 1835k barrels compared with current estimates at the DOE of a drop of 750k barrels.Due to the recent volatility in the market these numbers could result in bigger moves than usual. Where the market closes in view of a bullish or bearish number could be key going forward.
Bull View

Having bounced impressively even after such a huge down move the bulls will be confident in the long term. Having already taken back the $102.00 level they will target the key $106.00 next. If they can get the market above here, and relatively quickly, new highs will be back in sight in the longer term.
Bear View

The bears had an impressive few days with a truly jaw dropping rout in commodities across the board last week. They will be disappointed not have kept the market below the $102.00 level though and will look to defend $106.00 first and foremost. Key will be not letting the market bounce back to the previous value area of March and April ($102.00-114.00) and stay there so soon after the down move.
Futex View

Despite the large sell off last week we still remain bullish in the longer term. In the short to medium term however the picture is much more mixed. We expect to see more extended moves than usual due to the recent volatility. We will look to see how the market reacts if it gets close to the $106.00 level and want to see it stay above $98.00 if it is to build more value back at these elevated levels.

27th April 2011
Commodity Overview
Focus on Oil

WTI Crude Light Oil futures made a new 2011 high on Monday before having a sharp pull-back in the wake of Osama Bin Laden’s confirmed killing by US special forces. The market has been predominantly range bound over the past week between support at 110.70-90 and April’s high around the 114.00 handle.

Thoughts from the trading floor

After building value around the yearly highs over the past week, the market looked primed for another leg higher, especially after breaking April’s highs of 114.07 initially on Friday and then again in early Monday trade, touching 114.83. Then came the announcement out of the US that Osama Bin Laden had been killed by US special forces which saw Oil, along with other commodities fall dramatically across the board. The market this morning is trading around the 111.00 handle - fluctuating above and below the levels seen at 110.70-90. The market has traded lower over the past couple of days without making a meaningful break. Any move through the 110.00 handle and we could see some weak longs further flushed out of the market. If the June contract can hold above these levels again today we may see another move back towards the top of the trading range of the past few days.
The confirmation of Bin Laden’s killing has initially caused a sell off in Oil and commodities across the board. It will be interesting to see how the market moves long term on this news. It has the potential to be long term bullish for Oil especially, should Al-Qaeda and other terrorist groups plan revenge attacks on the Western nations, or tensions in the Middle East intensify with extremist groups rising against the West. For now, look for a reaction around the current levels. If the market can break the 110.00 handle we could see a move back down towards the 106.00 handle and previous support. If the market bounces again from here and gets through the highs it will provide an extremely bullish outlook.
Last night the American Petroleum Institute reported another large build of 3196k barrels, comparing with DOE estimates of a build of 2000k barrels. The API Gasoline showed a small build of 680k barrels compared with current estimates at the DOE of a drop of 500k barrels. As we have seen recently, the trend is for a surplus in supply in the US, rather than a shortage of Oil. It seems unlikely in the near term that OPEC will increase output to help bring the price down as supply does not seem to be an issue at this point.

Bull View

With the market having broken the highs this week the momentum is firmly with the bulls, despite the pull-back since Bin Laden’s death was announced. The bulls will look to keep the market above the 110.70-90 level in the short term with major support coming at the 106.00 handle. If these are not broken then a move back above the highs looks likely in the medium term.
Bear View

The bears will be heartened by a false break of the high earlier in the week, even if it came about via a large news story. They will now look to leave this as a double top print and pressure a further sell-off. With the market currently trading around short term support, the bears will want to make a significant break lower and test the daily triple bottom around the 106.00 handle in the coming days.
Futex View

We are still long term bullish on Oil and expect a more significant break of the highs in the coming weeks and months. With the sharp pull back from Monday’s break higher however there is potential for the market to fall some more in the short term. We will look to buy above the aforementioned 106.00 level but be cautious of bears gaining some momentum at these levels.