By Phil Flynn
| As the stock market failed on Friday after a spike after the jobs report, oil(NYMEX:CLM14) went higher. The reason was clear. No one wanted to be short over the weekend with rising political and rightly so. Today we see oil pulling back adjusting to the falling stock market because even though we had some disturbing geo-political events over the weekend, traders can act to hedge themselves more quickly in the event there is a major headline and there were a multitude of headlines that could impact oil prices going forward. Not to mention wheat prices. Russian backed protests in eastern Ukraine and the death of one Ukrainian soldier is raising fears that Vladimir Putin will again be on the move. The protestors are calling for canceling the presidential election in favor of a referendum on becoming part of Russia. We also are seeing increased tension between Japan and North Korea. The National Post reported that U.S. Defense Secretary Chuck Hagel delivered a two-pronged warning to Asia Pacific nations Sunday, announcing that the U.S. will send two additional ballistic missile destroyers to Japan to counter the North Korean threat, and saying China must better respect its neighbors. |  |
| Reuter’s news is reporting that the navies of Iran and Pakistan plan to hold joint military exercises in the eastern part of the Strait of Hormuz on Tuesday, Iran's state news agency said on Sunday. Several Pakistani naval vessels, including a warship and a submarine, docked at the Iranian port of Bandar Abbas on Saturday, the IRNA news agency said, citing an Iranian Navy statement. Iran's state news agency said the joint naval exercises were aimed at promoting military cooperation between Tehran and Islamabad but gave no details of the plans. Yet with all these worries oil is down mainly because risks were priced in on Friday and so far there has been no disruption to supply fears that Russia would turn off the spigot at least until this point has not happened. RBOB(NYMEX:RBM14) prices seem to be gaining on the Ultra-Low sulfur diesel. The USA Today reports that gasoline prices are making their annual spring climb. The average U.S. price of a gallon of gasoline has risen 5¢ the past two weeks. The Lundberg Survey of fuel prices released Sunday says the price of a gallon of regular is $3.61, the highest price in Lundberg's twice-monthly surveys since late July 2013. The price is 4¢ below its year-ago point but 44¢ higher than 2013's low. Californians saw some especially painful spikes this weekend. Drivers there are averaging $4.04 a gallon after a 35¢ jump in wholesale prices since mid-March -- prices could hit up to $4.25 within days. Tarnishing pump prices in the Golden State: lower supplies and rising crude costs. Not to mention Ethanol, blended into gasoline, is also up nearly 60% year-to-date on higher corn and rail shipping costs. Natural gas(NYMEX:NGK14) prices are consolidating. While short term thinkers point to moderation temperatures big picture this market is a price spike waiting to happen. The natural gas market needs record production when many producers say they are cutting back. Rig counts are falling not rising. Prices will have to rise to get producers moving. Buy calls! Gold(COMEX:GCM14) and silver(COMEX:SIM14) prices also have been riding the geopolitical risk roller coaster as well as trying to time the Federal Reserve. On Friday the government showed that U.S. nonfarm payrolls increased by 192,000 jobs last month, slightly below economists' estimate and well as the whisper number and in a zone where it was not strong enough to worry about raising rates or a slowdown in tapering. So gold rode the risk trade rising mainly on fear. Gold Core reported that “Gold surged 1.3% on Friday - its biggest percentage increase since March 12. Gold is not far from a one-week high of $1,306.50 hit in the previous session. Gold Core said that Iraq's central bank said on Friday its gold reserves had reached 90 tons, after buying 60 ton over the past two months to support the Iraqi dinar. They point out that Federal Reserve Chair Janet Yellen said last week that slack in labor markets showed accommodative policies will still be needed for some time which is also bullish for gold. Gold Core also said, “UK government now has powers to raid bank accounts and confiscate deposits. On Saturday the Financial Times covered the story and the fact that the hitherto unnoticed measures are now facing scrutiny and a backlash. “George Osborne is facing a backlash over plans to give HM Revenue & Customs unprecedented powers to dip into taxpayers’ bank accounts to seize unpaid tax debts,” according to the FT. MPs, banks and charities want robust safeguards over powers that will allow the Revenue to order banks to pay outstanding debts from taxpayers’ bank accounts, following fears that the measure could be used inappropriately and cause hardship. Andrew Tyrin, who chairs the Treasury select committee, said the MPs intended to hold further hearings into the new powers, which he said could set a worrying precedent. Many banks want judicial oversight to apply to the new powers, as they worry about being caught between irate customers and the tax authorities. “HMRC doesn’t have the best record of getting things right,” a banking source told the FT. The idea was previously floated in a 2007 consultation, but it was dropped after widespread criticism over the adequacy of the safeguards, the possibility of creating hardship and the risk of HMRC error. Grain prices may move today export inspections as well as our first crop progress report. Soybean stockpiles have been tight so it will be interesting to see it the demand stays strong, Farmers are opting to plant less corn. Yet with winter hanging on iota will be interesting to see just how much planting will get done but more than likely it will be below the five-year average. Weather in Brazil gave coffee(NYBOT:KCK14) a boost as dry weather is reducing the crop prospects again. Bloomberg reports that Coffee shipments from India, Asia's third-largest grower, are poised to fall this year as a rally in global prices deters buyers from Italy to Russia and after unseasonal rains cut output for the first time in six years. Exports may decline as much as 10% from 312,756 tons in 2013, said Ramesh Rajah, president of the Coffee Exporters Association of India. The harvest probably dropped below 300,000 tons in the 12 months started Oct. 1 from a record 318,200 tons a year earlier. ETF Trends reports that the iPath Dow Jones-UBS Coffee Total Return Sub-Index ETN (NYSEArca: JO) jumped 7.3% Friday while the iPath Pure Beta Coffee ETN (NYSEArca: CAFÉ) surged 6.4%. Coffee has been the best performing asset year-to-date, with JO up 58.5% and CAFE up 53.9%. |
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