The U.S. manufacturing number seemed to take the wind out of the sales for oil as the Institute for Supply Management’s Factory Index surprisingly fell to 49.5. That was the lowest reading since July, 2009 and a sign that the U.S. manufacturing sector is headed south. Now it is possible that the index and the drop in new orders came about because of Hurricane Sandy, but it did not seem to make a difference to traders who are worried about going over the fiscal cliff. Not even the fact that China’s manufacturing data should indicate that Chinese oil demand should go back to an all-time high helped because it is likely that would not be sustainable with the U.S. going into a fiscal dive.
What also is a concern is the weather. Weather in the U.S. is still very mild. Despite the call for falling temperatures it is clear that the earlier calls for a much colder winter are not looking good unless we see some kind of dramatic change. This is also pressuring natural gas as well.
Bio fuels are focused on beans and bean oil and the possibility of rains in Argentina slowing planting. China demand is also key. Soybeans rallied on the strong China data overnight but a cancelation of a bean order from Taiwan may soften some of the bullish enthusiasm. Dow Jones reported that the Taichung branch of Taiwan's Breakfast Soybean Procurement Association has passed on a tender to import up to 60,000 metric tons of soybeans, citing high prices. Taiwan is Asia's third-largest soybean importer after China and Japan. It buys around 2.3 million tons annually.
In other markets, Dow Jones reported that cocoa hit a nine-week high in expectations that production would fall short of demand in the current marketing year.