Commodities are cool again as hedge funds are adding to their long positions, counting on stimulus to drive markets higher. Oh sure, we have the drought driving corn prices to another record high and we have geo-political concerns surrounding Iran, Syria and Egypt, but this oil rally is mainly being driven by the hopes of cheap and easy, freshly printed money. Those hopes are being driven by the vow of European Central Bank head Mario Draghi to do whatever it takes to save the euro and the surprising support of those sentiments from German Chancellor Angela Merkel and French President Francois Hollande. Now with a pathetic growth rate in the US, the Fed will be under increasing pressure to act.
Refining runs were on fire last week. It looks like that that may take a toll on crude supply this week. We should see a drop of crude supply somewhere around 2.45 million barrels. We should also see gas supply increase by 2 million barrels and distillates by 2.5 million barrels. Runs should fall by 0.5 million barrels. Gasoline prices in the Chicago area soared after a fire in the Whiting BP refinery.
Natural gas also is attracting a lot of interest as the unrelenting heat is driving prices higher. Yet it is cheap natural gas that could sink the future of nuclear power. The Financial Times reports that GE head Jeff Imalt is saying that cheap natural gas is making investment in nuclear power less attractive. Gas and wind are the future!
We are in the "buy the break" mode. The upward bias remains across the commodity spectrum. The corn market is panicking as the realization that it is too late to save this crop is setting in. We'll get crop conditions today and traders know it is not going to be pretty!