Crude awakenings for markets

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May 27, 2014

Crude oil prices gained sharply this week, hitting a one-month high after U.S. Energy Information Administration statistics showed a quick drawdown in supplies. In its weekly Petroleum Status Report, the EIA stated that U.S. crude oil inventories slid by 7.23 million barrels, a 1.8% drop in one week.

While the drawdown was partially prompted by increased refinery demand, inventories are also falling due to lower U.S. imports of foreign crude, which fell to a 17-year low this week. As domestic crude oil production has been rising, demand for foreign crude has been waning.

Meanwhile, there are increasing calls for the U.S. to begin exporting crude oil, which it hasn’t done since the 1970’s, before the Arab Oil Embargo. Recent comments by the U.S. energy secretary Ernest Moniz and other Obama administration officials have indicated that the government may lift the export ban, which would reverse nearly 40 years of U.S. energy policy.

As the market digested these factors over the past two weeks, crude oil prices gained more than $4 per barrel, pushing near $104.50 on Friday.

As the price of crude oil rose, so too did gasoline, which jumped over a nickel per gallon during the week. Higher gasoline prices are hitting at a bad time for most Americans, as the upcoming Memorial Day holiday is typically regarded as the beginning of the summer driving season.

Soybeans Sprout Higher

This week, soybean prices reached the highest level since last summer, shooting skyward as news broke of stronger Chinese demand. China is the world’s biggest buyer of soybeans, and the Chinese buy most of their beans from the United States, making them the country most watched by soybean traders.

The primary driver behind Chinese demand has been rising meat consumption. As the Chinese population gains wealth, they have been eating more hogs, chickens, and other animals that are primarily fed a diet of corn and soybean meal. China is able to grow most of the corn it needs, but imports over 80% of its soybean needs.

As of midday Friday, soybeans for delivery in July were worth $15.13 per bushel, near the highest price since last July.

 

 

Opinions are solely the writer's. Walt Breitinger is a commodity futures broker in Valparaiso, Ind.  He can be reached at (800) 411-3888 or www.indianafutures.com. This is not a solicitation of any order to buy or sell any market.

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Alex Breitinger

 

Breitinger & Sons, a division of Paragon Investments

Commodity Futures Brokers

 

219.707.5332

800.411.FUTURES (3888)

www.indianafutures.com

 

This is not a solicitation of any order to buy or sell, nor does it provide any recommendations in regard to the market.  Information contained herein is believed to be reliable, but cannot be guaranteed as to its accuracy or completeness. Past performance is no guarantee of future results or profitability. Futures and options trading involve substantial risk of loss and is not suitable for all investors. Clients may lose more than their initial investment.

 

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Comments

Stop It

Try this trick next time you pump gas. Put in exactly one gallon and check the price on the pump and see if it matches what is advertised. Many are getting ripped off. I have an 18 gallon tank that I ran almost dry. Seriously. When I took right hand turns the truck sputtered and almost died.

The pump said I put in over 22 gallons. How does that work? I was in a hurry that day. The next time I'm going in and bitching and calling the phone number of weights and measures that is printed on each pump.