"We feel [oil is] very overbought at these levels and crude has had a very hard time putting new highs right now," said Zachary Oxman, managing director at TrendMax Futures. "I see the markets settling down for a few months before the fourth quarter." Inventories data The Energy Information Administration reported Wednesday that crude oil inventories at Cushing, Okla., the delivery point for Nymex crude futures, rose 200,000 barrels to 28.6 million barrels in the week ended June 26, rising for the first week since the week ended May 22. Meanwhile, gasoline inventories increased 2.3 million barrels and distillate stockpiles, which include heating oil and diesel, gained 2.9 million barrels. Analysts surveyed by Platts had projected an increase of 2.1 million barrels for gasoline and 1.4 million barrels for distillates. "A build in Cushing is definitely bearish and continues to make the case that we have ample supply of crude oil," said Tariq Zahir, managing member at Tyche Capital Advisors. "Gasoline inventories will help bring down the price of crude and get speculators to get out of long positions," he added. "We feel crude is due for a correction in the coming weeks." The increase in gasoline and other petroleum products came as refiners kept their production high, with utilization rate standing near six-month high of 87%, the EIA data showed. Total crude inventories excluding those in the Strategic Petroleum Reserve decreased by 3.7 million barrels to stand at 350.2 million barrels, the EIA said. Analysts surveyed by Platts had expected a decline of 2.2 million barrels in crude stockpiles. Crude inventories still stood above the upper boundary of the average range for this time of year, the EIA said. Late Tuesday, the American Petroleum Institute reported a decline of 6.8 million barrels in crude supplies. The API report helped boost crude prices earlier this morning. The API and the EIA use different methodologies in calculating U.S. petroleum stockpiles. "The EIA seems to lag the API so we are seeing a drop in crude," said Phil Flynn, vice president at Alaron Trading.
As oil rallies, passive investors increase their holdings - Big pension and endowment funds that invest in commodities by modeling their exposure on popular indexes have increased their purchases of crude rapidly in recent months, an analysis of regulatory data shows. This stake has likely contributed to the doubling in oil prices this year, a swift advance that has brought the role of financial speculators back onto the radar of policy-makers -- some of whom say financial investments in commodities should be curbed. Passive investors increased their crude-oil holdings to the equivalent of more than 600 million barrels in June, up more than 30% from the end of last year, a MarketWatch analysis of Commodity Futures Trading Commission data and the most popular commodities indexes shows. See detailed description of MarketWatch's findings. Over the same period, crude futures have jumped 60%, topping $70 a barrel in early June on the New York Mercantile Exchange. Oil rallied 41% in the second quarter alone, the biggest three-month gain in 19 years, even as energy agencies forecast a second-straight yearly decline in global oil demand this year. The correlation between rising oil prices and increased index investment has reawakened calls to restrict the ability of financial investors to take large stakes in commodities. Unlike in past decades, though, shadowy hedge funds and secretive financiers aren't getting the major blame. Instead, it's long-term investors like California's biggest public-employee pension fund and Harvard University's endowment that have gradually widened to include assets beside stocks and bonds. The makeup of this new class of commodity investors means some of the same people feeling the pangs of sharper gasoline prices also are getting an indirect benefit from their retirement funds' bets on commodities. "They are looking after the interest of retired teachers and doctors and other people," said Tim Guinness, chief investment officer at the $500 million Guinness Atkinson Global Energy Fund /quotes/comstock/10r!gagex (GAGEX 19.83, -0.81, -3.92%) . Big index investors have moved into commodities as a hedge against inflation and a weaker U.S. dollar. But their combined weight is so large that they risk having an outsized impact on prices they aim to simply follow. "Institutional investors such as country funds and pension funds are basically pushing prices where they shouldn't go," said Steve Briese, author of "The Commitments of Traders Bible." MarketWatch used a supplement to the CFTC's Commitments of Traders report to calculate index traders' holdings in oil positions. New momentum The rise in prices and index investment comes as the Obama administration campaigns for a new legislation to overhaul the financial system, partly by tightening regulation in opaque over-the-counter markets and complicated derivatives trading. A Senate investigations panel led by Sen. Carl Levin, D-Mich., last week released a 247-page report saying index traders have made large purchases on the Chicago wheat-futures market and have pushed up futures prices over the past few years. http://www.marketwatch.com/story/index-investors-hike-stake-in-oil-as-prices-rise On Tuesday, Rep. Peter DeFazio, D-Ore., introduced a bill that would give the CFTC new authority to prohibit "excessive speculation." The move to rein in financial investment in commodities reached a fever pitch last year as energy and food costs spiked. Then, as prices tumbled in the second half, momentum for a big legislative change dissipated. Nevertheless, some analysts say there's no solid proof that financial investors are driving up commodities prices. "We would argue that the reason most of these participants are getting into the market is due to the perception of tightening fundamentals," said Doug MacIntyre, senior oil-market analyst at the Energy Information Administration, the statistical arm of the U.S. Energy Department. The CFTC in September released a report showing index investment had no impact on last year's rally in oil prices. The report, based on a special survey of swaps dealers, showed index holdings of crude oil declined in the three quarters ended June 30 while crude prices rose sharply. The report was criticized by some analysts for inconsistencies, and CFTC Commissioner Bart Chilton said he had "significant concerns" relating to the underlying analysis. A CFTC spokesman declined to comment further on index funds' role in commodities prices. Here comes the passive investor Index investors like the California Public Employees' Retirement System allocate a portion of their investments to tracking the performance of an index that includes a range of commodities CalPERS, the biggest U.S. public pension fund, now has about $600 million in commodities that track the 24-component S&P GSCI commodity index, one of the two most popular commodities indexes. Funds like CalPERS typically get their exposure to commodities by engaging in trades with big derivatives dealers such as J.P Morgan Chase & Co. /quotes/comstock/13*!jpm/quotes/nls/jpm (JPM 31.72, -0.56, -1.72%) and Goldman Sachs Group /quotes/comstock/13*!gs/quotes/nls/gs (GS 142.65, -0.84, -0.59%) . Trading between funds and dealers takes place over the counter and doesn't get reported to the futures regulator. These dealers, in turn, hedge their risk by taking a similar position in futures exchanges or other markets. The CFTC currently allows swap dealers to take unlimited positions on futures exchanges, effectively allowing big institutional investors to buy as much commodities as they want. The CFTC also classify swap dealers in a category that's usually reserved for oil producers and refiners, creating a so-called "swap loophole." These derivatives dealers disclose to the CFTC how many futures contracts they are holding on regulated exchanges -- such as the New York Mercantile Exchange and the Kansas City Board of Trade -- to hedge their dealings with the index investors. The weekly report, however, only covers 12 agriculture commodities such as corn and wheat. MarketWatch uses the CFTC data and publicly disclosed weightings of commodity indexes to estimate index investors' oil holdings and total commodity holdings. At the peak of oil prices last year, index fund holdings in oil had surpassed 700 million barrels. They then slid to near 400 million barrels in December. Index holdings in oil have since rebounded. This analysis also shows that the dollar value of total commodity index investment rose more than 60% this year to above $140 billion. The calculation, which was reviewed by CFTC Deputy Chief Economist James Moser, is a rough projection of index investors' oil positions, and may underestimate the size. A similar calculation is used by Briese and Adam White, director of research at White Knight Research & Trade. The calculation also was presented by Michael Masters, a fund manager at Masters Capital Management, to Congress last year. Buy and hold gets blame The growing presence of index funds in commodities has raised the hackles of some analysts and policy-makers because they take a long-term approach to investments that make them relatively indifferent to changing fundamentals. "These passive investors do not trade on the basis of supply and demand," said Masters, whose firm holds airline stocks, such as AMR Corp. /quotes/comstock/13*!amr/quotes/nls/amr (AMR 4.21, -0.01, -0.24%) and Delta Air Lines Inc. /quotes/comstock/13*!dal/quotes/nls/dal (DAL 5.86, -0.02, -0.34%) , that can fall when oil prices rise. "They are almost always buying, and their buying pressure pushes prices up." Firms like CalPERS dispute those charges, saying fundamentals rather than financial speculation has stoked prices higher. Despite the link between index trading and oil prices, that positive relationship falls apart with other commodities. Natural gas, for example, has slid 30% this year even though index investors also increased their positions in the fossil fuel. Masters' views gained currency last year on Capitol Hill and may translate to another stab at restricting big brokers' ability to buy futures contracts if oil prices keep rising, putting an expected second-half economic recovery at risk. But oil prices themselves may derail this debate. Even if energy demand picks up along with an expected economic recovery, many analysts say oil prices have gotten ahead of themselves. Futures have doubled since February's low. By contrast, in 2008 it took more than seven months for oil futures to gain more than 50% to their historic high near $150 a barrel. Mark Gilman, an analyst at research firm Benchmark Co., said the current oil-market environment has a "strong and almost eerie resemblance" to oil's boom during the first half of last year. He anticipates oil could fall again to the $40 to $50 level. "Recent history is likely to repeat itself with a sharp price decline," Gilman added. Moming Zhou is a MarketWatch reporter based in New York.
I take it you have covered? Oil could fall to $50 in the short-term. The 'green shoots rally' is turning decisively brown and the optimism that oil demand will pick-up soon will go with it.
In trading this week, investors are looking ahead to second-quarter earnings season, which will have its symbolic start when Alcoa posts its results after Wednesday's closing bell. The aluminum maker's shares were recently up 3.2%, recovering some of the previous session's steep decline. Energy and basic materials companies are widely expected to report sharply diminished second-quarter profits. According to data from Thomson Reuters, analysts are expecting the S&P 500's basic-materials sector to show a 79% fall in profits. The energy sector is expected to show a 65% drop, reflecting the deep slide in commodity prices over the past 12 months. The consensus expectation for the S&P as a whole is a 36% profit decline. Firms' comments on the outlook will be key to shaping market participants' strategies for the rest of the year at a time when many are wondering how deep the recent correction might run. "I think one of the key things will be where the financials come out in this," considering their role in the credit crisis at the heart of the long-running recession, said strategist Jim Paulsen, of Wells Capital Management in Minneapolis. "If they can come in better than expected, that will be a powerful statement." The financial components of the S&P 500 are expected to show a 53% slide in earnings, according to Thomson Reuters. And, in the latest sign of weakness for financial and consumer companies struggling for cash, Discover Financial said it has launched a $500 million stock offering and is planning to offer senior notes in the near future. Discover recently slid 10% to $9.40. But financials haven't paced the market's declines on Tuesday or last Thursday. In Thursday's session, a weak monthly nonfarm payrolls report spurred broad selling and pushed the Dow down more than 200 points. And traders are saying the impact of that report is still weighing on stocks Tuesday, particularly on industrial firms. ------------------ "The employment report last Thursday provided this risk that consumption and consumer spending will be weaker in the third and fourth quarter and the market has to move to reflect that," said John Brady, senior vice president with MF Global. -------------------------- Helping offset the market's Tuesday drop, Bank of America Merrill Lynch upgraded its view on the chip sector. Merrill raised its 2010 sector growth estimate to 21% from 14%, based on an improved outlook for global economic growth. Intel and Marvell Technology rose 0.5% and 3.3%, respectively. The Philadelphia Stock Exchange's Semiconductor Index, which tracks chipmakers, was flat.
ALoha guys, how you all doing?? I just looked and saw that oil has finally done what it should have done a few weeks ago and fallen back to closer to what a correct price for the current time should be.. (I dont for 1minute believe that this is the lowest its going though) Since the idea and mentality that seemed to float around the market for the last few months was after the dow bounced from the 6000s was that all the badness was over, and that everything was going back to where it had started from last year. And i didnt for 1minute buy any of that nonsense and garbage though, since theres absolutely nothing positive out there to keep buying going. There was merely a ''lack of fresh bad news'', which caused the market to level off and then rise sharply, but that rise got way way overdone by too many people believing all the advertisements that said ''nows the time to load up and hold''. But just like there was a lack of 'fresh bad news', theres now also still been the continual lack of any good news and more importantly lack of any signs of good news coming in the next few years. The total opposite infact, as people are only now actually starting to stop being twats and fools, and actually using their brains to look and see that in the future things simply wont be the same as they were before. People wont be able to buy much, there wont be any luxury spending by normal people on cars & homes. The world of the future, that will last MINIMUM next 6-8 years, will be the normal average people on average salaries (16k-37k gbp) that used to be known as the working middleclass, they will now just wakeup everyday-go to work-come home-and follow that routine, they wont go out to restaraunts during the week or weekends anymore, they wont go out on the weekends getting home improvements or new furniture, they wont go on weekly or even monthly shopping to buy new clothes, they wont be buying a new car every few years, and they will be taking just 1holiday every 1-2years at a cheaper place than before. Their main focus now will be to just stay in as much as possible and have as much 'free fun', spend their evenings and weekends focusing on trying to save as much money as possible each month to keep them getting by (as now the only money they have is what they earn, no safety net of creditcards anymore). And the less wealthy, who earn under £16,000 per year (about 25% of uk population) combined with the 10 - 15% of the population who are unemployed, !!totalling 35%-40% of entire adult population of uk!!....... They will be struggling to get by on basic basic low level budgeted amounts of food, basic travel to work by public transport only NOT cars as they are waste of money that people cant afford to waste, they will have budgets of £10-£20 per week that will spend at teh supermarket to have to cover all their food and drink for the whole week, they wont be taking any overseas holidays or if they do it will be cheap n cheerful style ones, and they wont have any disposable income/under £50 per month spare that they will keep in cash as a safety net for when they lose their job. So the main biggest change will be that now EVERYONE, from EVERY earning level will be thinking and analysing money&spending many many times each day everyday, and so there will be a HUGE amount of difference in the willingness of ALL people to spend anything extra than the cheapest available. Thats how the world is going to be for the next 6-10years, and so the whole idea of the price of oil rising and then being able to stay there while this is how the consumer mentality will be, is just ridiculous and not going to happen.
The reason why im back to looking so closely at the markets and economy is because i have £4,100 cash, but need to get £900 extra asap. My work salary, when has tax taken, will just about barely cover all my rent and living expenses n stuff, so unless i can fiund some way of extracting some money out of a private pension fund that i know i have somewhere, im gna have to tear that £900 out of the market again. Ive put £3,460 into my trading account, and so am looking and waiting for the right time to buy oil. When i look at the chart heres what i see- (pic attached) The market amazing is still fitting around where it crosses those lines that i drew back in January! :eek: We have had a big drop over the last 10 days of $14s, and so on my next chart ive show the 2 levels that in looking to buy in at either today or monday (depending on when we get a volatile base and reversal forming).