Gov’t Tries To Oil Economy

  • September 20, 2000
  • Marc Dupee

Oil surged in early New York trading, punching to within
two bits of $38.00 a barrel for the nearby October contract following Tuesday’s
bullish weekly American Petroleum Report (API). The API report highlighted the near-crisis-like environment in
energy by recording an unexpected drop in crude stockpiles, which are standing
at a 24-year low. But comments by White House officials left the impression that
the government would step in–ostensibly to provide additional supplies of oil
from strategic reserves–to avert a crisis. Stock index futures erased losses
after the reassuring words.

Although refineries are working at 95% capacity,
stockpiles of heating oil still stand approximately 37% below last year’s levels and are currently thought to be insufficient to
meet the demand that could be required in the event of a harsh winter. A wildcard in the energy situation
is Iraq. Iraq could pull its oil off the market and that would cause a spike in
the price of oil. 

November crude
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Stock index futures and
T-bond futures keyed off the higher oil prices with Dow futures
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getting particularly hard hit due to the “older economy” nature of
most stocks on the index which are generally more dependent on energy costs for profitability.
Dow futures fell 123.0 to 10,805.0, September S&P futures
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back from a 25-handle deficit to close 9.50 lower at 1469.00. NASDAQ 100 futures
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3853.00.

One other very positive indication that we could get a
turnaround either later Wednesday or Thursday was the unusually high number
(four) of up indications from the
Market
Bias Indicators Page. When three or more of these signals line up in the
same direction, there is a higher-than-normal chance that market averages will
proceed in the direction of the Market Biases. 

Dollar index futures (DXZ0), from the Momentum-5
List, traded to a new high, closing up .30 at 35.30. Lower
business confidence from Germany and slower Italian growth projections suggest
that Euroland’s economy will under perform vis-à-vis the the US. 

Euro FX futures
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British pounds
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closed slightly lower and near contract lows. Italian Prime Minister Giuliano Amato
didn’t  help the euro by mentioning that, “The weak euro makes businesses
happy.” Recent comments from other European leaders has highlighted the
lack of unity in between central bankers and politicians and creates uncertainty
about the direction of monetary policy. 

In the metals,
December gold
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out of a descending triangle. Fear about global economic growth took
the momentum out of the recent copper rally. December
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2.00 lower at 91.05.

 

November soybeans
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bushel–on ideas that harvest yields may come in under forecasts, but locals
sold into the rally and drove the price back to a net gain of 3 3/4 on the day
to 487 1/2. 

Pork contracts rallied off lows on mixed opinions on Wednesday’s cold
storage report. October lean hogs
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made good on a Turtle Soup Plus One Buy
 setup off multi-month lows to close 4.575 higher at 62.150.

Coffee
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contract low, falling 3.000 to 79.15 and made good on a Multiple Days Low
Volatility reading. Although the volatility lists do not suggest market
direction–only that a futures is likely to make a larger-than-expected
move–the contract has been on the
Futures
Trend Matrix as in a steady downtrend. News that Vietnam would not be
able to afford implementation of a regime to enforce a coffee retention program
shook up the market to the downside but the market may respond to the lows and
an unexpected drop in the Brazilian crop estimate by a respected private
coffee-watcher with a bounce on Thursday. Although the contract missed making a
new low by three ticks, it essentially sets up a Turtle Soup Plus One Buy setup. 

Orange
juice
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Agriculture that juice in cold storage was 11% below levels from one year ago.
Traders may also be eyeing the trade deal awaiting Presidential approval which
opens the Chinese market to agriculture products. The new trade deal would cut
tariffs on US orange juice exports from 40% to just over 12%.