CommStock Israel Investor
Insights Newsletter
Monday, March 23, 2009
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See article on Gold.
1) Oil edges lower, holds above $50
Crude settled lower Friday as the greenback
recovered losses and the market considered the longer term
repercussions of the Fed's spending plan.
By Catherine Clifford, CNNMoney.com staff writer
Last Updated: March 20, 2009: 5:59 PM ET
NEW YORK (CNNMoney.com) -- Oil prices fell Friday but
managed to close above $50 a barrel for the second day in a row
as investors mulled the trillion dollar U.S. plan that is aimed
at thawing credit markets.
Crude for April delivery settled down 55 cents to $51.06
a barrel. Oil prices seesawed through the session, rising as high
as $52.13 a barrel and falling as low as $50.30.
Prices were volatile Wednesday after the Fed announced
another $1 trillion injection to stimulate credit markets, raising
inflation fears.
Oil settled above $50 a barrel on Thursday for
the first time since late November, as significant weakness in
the greenback pushed crude prices higher. But Friday, the dollar
recovered some of the previous day's losses, keeping a lid on oil
gains.
Crude oil is traded in U.S. dollars around the globe.
When inflation fears rise, the dollar loses value, pushing the
price of oil higher.
"In a blink of an eye the Fed with its unlimited power
to print money can change the dollar value of a commodity or its
long term trend in an instant," wrote Phil Flynn, senior market
analyst at Alaron Trading, in his daily energy report.
Meanwhile, the market was uncertain about how the Federal
Reserve's announcement's from earlier in the week would play out
for the commodity markets and the economy. "The one thing that
is for sure is that the rules of the game have changed," Flynn
wrote.
Demand for oil remains very weak right now, which is
keeping prices in check. However, one analyst said that the market
is betting that in the longer term, oil prices will rise because
of dollar inflation and economic recovery.
"If you look at the near term fundamentals for oil,
they are still bearish," said Andrew Lebow, senior vice president
of energy at MF Global. "And that was outlined in this week's EIA
[Energy Information Administration] report."
On Wednesday,
the government reported stockpiles of gasoline increased by 3.2
million barrels and crude supplies increased by 2 million barrels.
But, the Federal Reserve's aggressive moves could result
in recovery in the economy in later 2009 and 2010, said Lebow,
and that was pushing up the price of crude oil to be delivered
later. Oil traders buy and sell oil to be delivered at a future
date. "We are seeing a back end rally on crude," said Lebow. "Demand
for the April contract was just not as strong today."
He also said that the Fed's spending initiative has
caused inflation concerns, contributing to the rally in crude prices
for delivery further out into the future.
Friday is the last trading day for the April contract.
Starting Monday, the May contract becomes the so-called front-month
contract. Crude for May delivery was up 15 cents to $52.19 a barrel
at 3pm ET.
A research report released Thursday by JPMorgan raised
its year long estimate for the price of oil for 2009 to $49.38,
up from its previous estimate of $43.25 for the year.
The report cites supply limits for the increase in price. "Despite
weak economic growth, OPEC output adjustments seem to be setting
the base for a tightening of oil market balances in the second
half of the year."
2) Commentary by David Zwebner,
CEO of CommStock Trading
U.S. Economy - Gloomy CBO Forecast
The U.S. Congressional Budget Office said that it expects real
GDP to be down 3.0% in 2009 and up 2.9% in 2010 .The March 2010
eurodollars ended down .01 at 98.555.
While Obama plans to present the new TARP plan shortly,
the market is showing signs of skepticism and closed down on Friday.
An interesting idea is being floated which may have
some merit….allow foreigners to get automatic rights to obtain
green cards and thereafter citizenship (after careful background
vetting) conditional on their purchasing homes in the U.S without
receiving mortgages, plus providing proof they have sufficient
funds to live with for at least two years plus work skills.
Grains and Cotton
The USDA said today that 455,000 tons of U.S. corn was sold out
of the country. 116,000 tons went to South Korea; 116,000 tons
of corn went to unknown destinations; and 55,000 tons went to
China. For 2009-2010, 110,000 tons of corn were sold to China
and 58,000 tons were sold to unknown destinations. May corn was
steady at $3.965.
The U.S. winter wheat crop may get some rain tomorrow,
but overall, the ten day forecast for northern Texas continues
to look dry. May wheat fell to $5.502.
May soybeans closed up 11.5 cents at $9.52, the highest
close in a month, while farmers in Argentina continue their protest
against high export taxes.
May cotton finished up 1.21 at 44.08. the highest close
in three weeks, with support from this week's drop in the U.S.
dollar and dry weather in Texas.
Coffee
The Executive Director of the International Coffee Organization
said in today's annual presentation that he expects world coffee
consumption to increase 1.25% in 2009 to 129.6 million bags.
His most recent estimate of the 2008-2009 world coffee crop was
just under 128 million bags. May coffee ended up .05 at $1.1620.
Orange juice
After the close, the USDA said that there were 1.25 billion pounds
of frozen orange juice concentrate in storage on February 28th,
up 33% from a year ago. May orange juice was up .15 at 72.75.
Energies
May crude oil was up .03 at $52.07 after a week of big announcements
from OPEC and the Federal Reserve.
Currencies
Statistics Canada said that retail sales totaled C$33.7 billion
in January, up 1.9% on the month and stronger than expected,
led by an increase in the automotive sector. Also, new vehicle
sales were up 5.5% in January. The June Canadian dollar ended
down .12 at 80.73.
Eurostat said that industrial production in the Euro
area 16 was down 3.5% in January, the biggest drop since records
began in 1986. The June euro fell 1.08 cents to $1.3552.
The June yen closed down .0160 at 1.0433 after two big
up-days in the aftermath of Wednesday's Federal Reserve announcement.
David Zwebner, CEO
CommStock Trading Ltd.
Tel: +972-(0)2 624-4963
Fax: +972-(0)2 624-4876
www.ecommstock.com
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