No Deal. Crude Oil (NYMEX:CLN14) is being supported as China show manufacturing expansion and the ceasefire in Ukraine ends even as OPEC production soars. Ukrainian President Petro Poroshenko said that his country would not renew a cease-fire with the pro-Russian separatists and said they would renew military operations to "attack and liberate our land." Crude is getting some support from China's official manufacturing PMI reading increasing to 51 from 50.8. The number did show expansion but fell short of the average guess. Oil is also being supported by Iraq where Isis militants continue to make headway.
Reuters reports that the newly elected Iraqi lawmakers are meeting on Tuesday, under pressure to name a unity government to keep the country from splitting apart after an onslaught by Sunni Islamists who have declared a "caliphate" to rule over all the world's Muslims.
Add to that a tropical depression that now looks like it is headed up the East Coast could damper gasoline demand as well as fireworks display. It looks like the fireworks will be in energy as we get closer to the holiday weekend. Gasoline (NYMEX:RBN14) fell as worries about storm related demand destruction takes hold. Yet another dynamic to oil is the dollar. The weak dollar is also lending support, not only to oil but to gold. Spot gold traded at its highest level since last March. Copper is flat after its recent run as the China data confirmed what the copper bulls were looking for.
Bloomberg Reports that OPEC crude production climbed for a second month in June as gains in Saudi Arabia and Nigeria made up for the loss of Iraqi barrels. Production by the 12-member Organization of Petroleum Exporting Countries rose by 278,000 barrels a day to 30.223 million, according to the survey of oil companies, producers and analysts. Last month's total was revised 43,000 barrels a day lower to 29.945 million because of changes to the Kuwaiti, Libyan and Ecuadorian estimates.
Rain does make grain. Grains took a big drop after the USDA showed crops are much further along than anticipated and there is more in the bin than we thought. Farmers planted more soybean (CBOT:ZSN15) than in the history of man-kind leading to a massive drop. The USDA said that "much improved" seeding conditions over the spring meant that planting of soybeans was 95% complete! Corn (CBOT:ZCN14) stockpiles came in at 3.854 billion and way above the t 3.7 billion bushels estimate and a whopping 39% higher than the last year. Cotton hit a 2 Year low after the report.
Is it time to get back in trading only commodity funds? Dow Jones reports that "Roughly half the commodities in the DJ-UBS Commodities Index are in backwardation, when nearby-delivery contracts trade at a premium to later-delivery futures. In some markets, like oil, the backwardation was prompted by supply disruptions, while in others, like natural gas (NYMEX:NGN14), it's come as a result of demand shock. Either way, long-term investors like PIMCO's Nic Johnson get an additional profit as they shift, or roll, positions from nearby to later-dated contracts. "You get paid to have long exposure right now," he says. While PIMCO says it's worth owning commodities as an inflation hedge and a diversifier, the fact that they're paying you to own them is also high on the list, Johnson says." As a side note the Rogers fund that is Offered and managed by the Price Group is the best performing commodity index so far!