Specs Burn Oil Patch

  • August 7, 2000
  • Marc Dupee

“Sold” was the word most commonly heard in the
pit as traders dumped long oil and product futures positions one day before
release of the weekly American Petroleum Institute report on stockpiles.
Analysts who are looking at last week’s surprising low-inventory build levels as an
aberration see firming crude oil stores increasing and prices dropping. 

Heating oil
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led the way down and and made good on a
Turtle Soup Plus One
Sell to close .0364 lower at .7821. Crude oil
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28.91 and
unleaded gasoline
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Going the other way, natural gas
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Momentum-5
List and
New 10-Day-Highs List rallied for a fifth day on rising volume to close .052
higher at 4.348.

Still, the jury is out on the fundamental picture
in the energies. Phil Flynn, Senior Energy Analyst at Alaron Trading made these
observations: “The market is in denial that we’re still near record lows in
stockpiles. Traders are complacent, betting on the come that OPEC will increase
output and that heating oil will easily and rapidly be converted from crude. But
while the market may not be worried, the Department of Energy is, and said so
last week. They are especially worried about heating oil. Last week’s low API
stockpiles number was an aberration but the question remains, will Tuesday’s
number be big enough and show enough of a build to start pulling us off these
record low stockpiles levels? There could be panic buying and we could still go
to $40 if any problems surface, and there are plenty of potential
problems.” 

Interest rate futures sold off throughout the session as
a lack of fresh news for the week left traders reluctant to extend recent highs.
September T-bonds
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10/32, respectively. 

Rallies in biotech, semiconductors, and networkers fired
up stock index futures.
September S&P futures
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NASDAQ 100 futures
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digits and
Dow futures
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In currency futures, the
Japanese yen
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Low setup for a loss of .0055 to .9231.

From the
Implosion-5 and
New 10-Day-Low lists, cocoa opened at a contract low, attempted but failed
to rally, and closed down 15 at a contract low of 762. The International Cocoa
Organization cut its estimate of the global surplus of cocoa, which could
provide some relief off lows.  

Coffee traded in a narrow-range pattern at its
lows in a setup that argues for additional downside. Coffee closed down slightly
at 85.40, a multi-year low and also registered on the Multiple Days Low
Volatility List, implying that the September contract could make a
larger-than-normal move.