Feeding the Bull
They say the bull needs to be fed with news every day, and overnight from China is providing it. The problem is that it might be bull. Overnight China's total exports climbed 10.6% in January from a year earlier the highest level in six months. That blew away market forecasts and immediately had some traders crying foul. Most believe that Chinese companies are over invoicing to basically launder money so they can use that cash to invest in China’s hot sectors. Imports also surged by 10%.
Today traders also will get to see the Energy Information Administration data. Last night the American Petroleum Institute version is pretty much what the market expects to hear out of the EIA. The API reported that crude inventories rose 2.1 million barrels, analysts’ expectations were for an increase of 2.7 million barrels. Crude stocks at the Cushing, Oklahoma, fell by 2.5 million barrels. That came as refinery runs increased by 74,000 barrels. Gasoline stocks fell by 479,000 barrels and distillate fuels stockpiles, which include diesel and heating oil, fell by 1.5 million barrels. The cold took its toll on production and supply. The Southern leg of the Keystone was hopping, explaining the draw in Cushing and a rebound in Imports in the Gulf Coast gave us a build over all. Crude imports rose last week by 363,000 barrels per day to 7.8 million bpd. Demand for WTI is stronger than Brent due to the cold helping bring in the spread along with the reversal of the southern leg of the Keystone XL pipeline.
Products are being supported by reining maintenance and outages as well. Bloomberg reported that Exxon Mobil Corp.’s refinery in Baton Rouge, Louisiana, will shut a hydrocracker next week for about two weeks of planned work. On top of that Phillips 66’s Alliance refinery in southeast Louisiana will begin shutting 10 units on March 5 for a turnaround that will last 47 days, according to two people familiar with the planned work according to Bloomberg. The turnaround includes the refinery’s only crude unit, whose atmospheric tower is plugged, and a delayed coker, who requires decoking, said the people, who asked not to be identified because the information isn’t public.
Of Course the China numbers also gave other commodities a boost. Gold is in break out mode and a close above $1,300 would signal a major move back to last year’s high. After months of trying to break the market back to the lows, bears are now on the defensive as the charts are looking downright scary. Add to that despite the ongoing strength in the stock market, the gold market is finding more investment demand as a historic distortion with the stock market and the cash market is making many fear that gold at these levels are way undervalued. While Janet Yellen, at first slowed gold’s rise and later encouraged it. It seems that Yellen sees no connection between the Feds policy of tapering and the emerging markets. That kind of disconnect is just the type of denial that will feed into gold’s run.
Emerging market turmoil is also enhancing runs in cocoa(NYBOT:CCH14) and coffee(NYBOT:KCH14). Not only is weather challenging the plunging value of the Brazilian real(CME:BR.C) and Ghana Cedi. Ghana’s central bank last week to imposed new controls on the movement of foreign currency, including restricting the size of withdrawals to stop a run on the currency. We are seeing a break out in cocoa to new highs overnight and Coffee keeps popping.