Commodities Sizzle

Posted by Michelle Torres on February 19, 2008 8:00 AM

Crude Oil ? Crude Oil futures jumped in overnight trading on continued expectations that OPEC may trim production at its March 5th meeting. Several of the cartel's ministers have indicated that they are leaning toward a production cut to head off a potential glut of supply in the face of a slowing U.S. economy and rising inventories. There is some market chatter suggesting the group may not officially cut supply due to heavy lobbying from the U.S. government, but individual member states may begin to discretely cut output. A fire completely shut down Alon USA Energy Inc.'s Texas City refinery, which has further bolstered petroleum prices. The explosion injured four workers and a company spokesperson indicated that the refinery may be offline for weeks. April Crude Oil confirmed a double bottom formation and an ensuing bull flag last week, hinting the market may test 98.50. The 9-day RSI is quickly approaching overbought levels, which may limit rallies going forward. Support comes in at 94.53, 93.61 and 92.58, while resistance can be found at 97.51 and 98.43.

Gold ? Gold futures come into this shortened holiday week higher on higher energy prices and a tumbling greenback. April futures briefly flirted with the key psychological $900 mark on Friday, which brought buyers back into the market. Gold has gotten a lot of help from outside markets today, with Platinum making yet another record high and Crude Oil prices moving sharply higher. The market has underperformed versus the broad commodity market of late, as some traders have diversified their portfolios while others have liquidated their Gold positions in favor of higher potential growth in other markets, like soft commodities and Platinum. The Gold market may be able to snap out of this funk if the Oil market continues to boom and the Dollar is unable to find support. Momentum was outpacing the RSI indicator prior to today's trading, suggesting a positive technical bias in the near term. Support comes in at 898.10, 890.10 and 879.70, while resistance can be found at 926.90 and 934.90.

Bean Oil ? March Bean Oil posted a new record high in overnight trading, boosted by higher energy prices. Winter storms in China have damaged the Canola crop, which will likely lead to increased demand for Bean Oil as a substitute. The Chinese customs office has already shown an increase in exports of over 40 percent for the month of January. The rising cost of fuel may also lead to increased demand as an alternative fuel source and smaller speculative grain traders may also forsake the wild Wheat market for the relative calm of Soybean products and Corn, which could lead to further fund inflows. The March Bean Oil contract formed a spinning top pattern ? suggesting lower prices this morning ? but the pattern was negated by the sharp move higher. RSI and Stochastics are showing overbought levels, which has not dissuaded traders from entering the market. Support comes in at 57.98, 57.40 and 56.98. The market has already taken out resistance at 58.99 and 59.40 in early trading, leaving only the 59.99 pivot point resistance area. Further resistance is anyone's guess.

Rob Kurzatkowski, Commodity Analyst

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