Oil Clears $70 Before Iran’s Deadline

U.S. 10-year Treasury bond yields dropped past recent lows to
hit new 5-month lows as demand for 5-year notes during a government auction were
at a 9-year high. The government auctioned off $14 billion in 5-year
notes, with 27.7% of the sales coming from overseas investors. Investors
are sharply focused on the slowing housing market and concern for inflation.

The euro continued to rally against the yen, sending it to
even higher recorded highs. The ECB is scheduled to announced a rate hike
decision tomorrow, with most investors betting there will be no hike.
However, the ECB’s Presidents comments are expected to forecast possibly two
hikes before the year is out. Economic reports from Japan from the last
two weeks have shown an economy not quite as hot as previously thought, meaning
that the BoJ might not need to raise rates after all. The dollar traded
basically flat against the euro and rallied moderately against the yen.
The dollar could be in trouble for the rest of the year if the Fed decides to
continue to pause the hikes, while Japan and Europe raise rates to contain
growing economies.

Crude oil futures rose 0.5% to close at $70.03 as investors
bet that Iran would defy the U.N. deadline for tomorrow to cease uranium
enrichment. Iran has been at the center of international debate for months
now over their controversial nuclear development program. Iran produces
about 1/5 of the world’s oil supply, the removal of which would cause an
upheaval in the supply side of the crude market. Natural gas fell 9% as
moderate weather cut the need for power-plant use of the gas. Natural gas
has been trading heavily in sync with weather reports through the summer.

Gold futures rose 1.1% as the dollar remains to look weak in
the global market. Anticipation of a rate hike in Europe and possible
hikes in Japan would signal weakness in the dollar against other major
currencies. Investors turned to gold today as a safe-haven against
uncertainty in the dollar. Silver rose slightly, aluminum rose 0.5% and
copper fell 0.5% on news that an agreement could be reached soon in the strike
at the Chilean copper mine.

The softs traded mostly flat, with the exception of sugar.
Sugar dropped 3% while cocoa rose 0.2%, coffee rose fractionally and orange
juice rose 0.3%.

The grains traded higher for the day. Corn was up 2.6%,
wheat was up 4.5%, soy was up 1% and oats were up fractionally.

Meats traded mixed, with cattle down fractionally and
porkbellies up 3.5% on unexpected demands.


Oil, Gasoline Inventories Rise In Most Recent Week (full

John Patrick Lee