Oil (NYMEX:CLM14) slipped as weak economic data and gas talks between Russia and the Ukraine will dominate the mood of the market in the aftermath of India's election. India's opposition leader Narendra Modi and his party won national elections in a landslide and traders are waiting to see what policies will come next. The pro-business platform could inspire big moves in gold and oil but the Indian stocks have pulled back after the buy the rumor of the BJP party win run-up.
Yet in the short term oil will try to balance near record U.S. supply versus dangerously low supply in Cushing, Ok., and your normal weekend pricing for geo-political risk.
Let's start with Russia. Once again Vladimir Putin is writing letters warning the EU that if Ukraine does not pay its bills than a cut off of supply may be coming. The FT Reports that "Russian president Vladimir Putin made a fresh appeal to European countries to step up efforts to resolve a gas dispute with Ukraine, highlighting the lack of progress less than three weeks before a threatened supply cut." The dispute has been simmering for months after crisis-hit Kiev stopped paying on time for Russian gas last year. But it is nearing crisis point after Moscow said last week that Ukraine, a key transit point for 15 per cent of European gas, must pay in advance for its gas from June, and that if no payment is received by June 2 it will cut supplies the next day.
Oil fell as weak economic data drove down bond yields and caused a sell-off in stocks. The Eurozone growth of 0.8% during the first quarter caused concerns that we would see more easing around the globe and so we moved to bonds for safe harbor buying. Janet Yellen spoke and she is staying the course so the market is starting to believe that rates won't move till perhaps next year. Oil also though is being supported by low Cushing stocks and talks that Cushing may fall below its minimum operating capacity. While some say that is unlikely to happen it does show the growing disconnect of WTI versus the glut of shale oil on the Gulf Coast.
Dow Jones is reporting that the gap between platinum and gold prices is hovering near the highest levels since January. Platinum currently trades more than $160 above the yellow metal."
Coffee (NYBOT:KCN14) is pulling back after an explosive upside move. The Spike came after Brazil's state forecasting institute Conab downwardly revising its estimate for this year's Brazilian coffee crop that came in below 45 million bags, which is 9% down on its last estimate in January.
Watch my Interview with Coffee Expert Jack Scoville, who also provides market commentary for Futuresmag.com.