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Commodities Update: Open Interest Analysis for April 10 2013

By Open Interest Analyst | Thu, 11 April 2013 19:53 | 0

Crude oil:

May WTI gained 44 cents on volume of 526,133 contracts. Open interest declined by 825 contracts, which is minuscule and dramatically below average. The May contract accounted for loss of 28,824 of open interest meaning that in the June 2013 forward contracts there was an insufficient number of new participants willing to make commitments at higher prices. On April 10, May crude oil made a high of $94.82, which was 2 cents below the high of $94.84 made on April 4.

During the past 3 trading sessions beginning on April 8, May crude oil has advanced $1.94 while open interest has increased 7,772 contracts.

While this is a positive number, it does not indicate much enthusiasm on the long side. During the past 3 trading sessions, the S&P 500 has advanced 37.00 points, but this has been unable to move the WTI market much beyond a fractional advances. Anyone who follows our work knows we have been bearish the petroleum complex, and have been skeptical of WTI to advance in the face of major weakness in Brent, heating oil and gasoline. We continue to advise a stand aside position in WTI.

Brent crude oil lost 44 cents on very light volume of 591,748 contracts. Volume was the lowest since April 1 when 293,047 contracts were traded. Open interest increased by 908 contracts, which is minuscule and dramatically below average. WTI continues to be the week sister, and until Brent shows independent strength, we will continue to recommend a stand aside position. Brent is on a short and intermediate term sell signal. Stand aside.

Heating oil:

May heating oil lost 1.34 cents on light volume of 118,053 contracts.

Open interest declined by 152 contracts which is minuscule and dramatically below average. The May contract accounted for loss of 3,898 of open interest. Heating oil continues to trade in a very weak fashion, and as this report is being compiled on April 11, heating oil is trading 4.30 cents lower and has made a new low at $2.8969. The next area of support is $2.8430 made on March 19 on the heating oil continuation chart. Heating oil remains on a short and intermediate term sell signal. Stand aside.

Gasoline:

May gasoline lost 7.73 cents on very heavy volume of 252,488 contracts. Volume was the highest since September 13, 2012 when 255,490 contracts were traded. On April 10, open interest declined 1,182 contracts, which in relation to volume is 75% below average. The May contract accounted for loss of 7,429 of open interest. For the first time since at least late June 2012, the May 2013 gasoline contract is selling at a discount to June 2013. This occurred for the first time on April 10 with May closing at a .0099 discount to the June contract. This is a very bearish development and it portends lower prices ahead.

Soybeans:

May soybeans lost 2.75 cents on volume of 222,557 contracts. Open interest declined by 6,867 contracts, which in relation to volume is approximately 20% above average. The May contract accounted for loss of 13,602 of open interest. The USDA released its export sales report on April 11 and for the 2012-2013 season 319,200 tons were sold and 64,500 tons for the 2013-2014 season. Total commitments to date are 1.334.8 billion bushels against a USDA projection of 1.350 billion bushels. Sales this week were dramatically above the USDA projected weekly sales.

The USDA World Agriculture Supply Demand report showed that domestically soybeans are very tight, but on a global basis are adequate. The tight supply of U.S. old crop beans are reflected in the large premium of May soybeans over July. For example, the May-July soybean spread closed at 25.25 cents premium to May, which is the highest close for the spread since September 17, 2012 when it closed at 31.50 cents premium to May.

As this report is being compiled on April 11, May soybeans are trading 9.25 cents higher, and the July contract 1.75 cents higher, which is a massive increase for the spread in one day. This continues to reinforce the very tight situation in US soybeans. Of course the tightness of soybeans in the United States is offset by the huge crop harvested in Brazil and Argentina. However, until the logistics problems are alleviated with respect to moving soybean cargoes out of Brazil, we should continue to see near-term strength in the May contract. Soybeans remain on a short and intermediate term sell signal. First notice day for may soybeans is April 30. Stand aside.

Soybean meal:

The USDA announced that 227,200 tons were sold for the 2012-2013 season in the most recent reporting week and 7,500 were sold for the 2013-2014 season. Sales for the most recent week were the highest in 5 weeks, and 96% of the soybean meal crop has been committed through the end of the 2012-2013 season. Soybeans are being crushed for meal at a pace that is unsustainable. Ultimately, price is going to have to ration current demand for soybean meal. Soybean meal remains on a short and intermediate term sell signal. Stand aside.

Corn:

May corn gained 4.75 cents on heavy volume of 438,980 contracts.

Volume was the highest since April 1 when 595,940 contracts were traded and May corn lost 53 cents while open interest declined 16,499 contracts. On April 10, total open interest increased 2,993 contracts, which in relation to volume is approximately 60% less than average.

The May contract accounted for loss of 19,463 contracts, which means there was sufficient buying in the July 2013 forward contracts to offset the decline in May. First notice day for May corn is April 30.

The USDA World Agriculture Supply Demand report also showed that domestic supplies of corn are tight, but global supplies are relatively plentiful. The USDA released its export sales report on April 11 and showed that 185,200 tons were sold for the 2012-2013 season and 290,810 tons for the 2013-2014 season. Sales were approximately the same as the average sale weekly year to date, but slightly below the USDA projection for the current crop year. Corn remains on a short and intermediate term sell signal. Stand aside with the exception of clients who wrote out of the money calls prior to March 28.

Wheat:

May wheat lost 12 cents on very heavy volume of 185,843 contracts.

Volume was the highest since April 3 when 219,206 contracts were traded while open interest increased by 4,099 contracts and May wheat advanced 25.75 cents. On April 10, open interest increased by 2,197 contracts, which in relation to volume is approximately 50% below average. The May contract accounted for loss of 10,584 contracts and first notice day for May wheat is April 30.

The World Agriculture Supply Demand report showed that domestic supplies of wheat are plentiful, and that global supplies are as well.

The USDA announced that 263,500 tons had been sold in the most recent reporting week for the 2012-2013 season and 76,000 tons sold for the 2013-2014 season. Sales were slightly above the USDA projection for the current crop year. For a period of about 5 days, price and open interest was performing in a bullish congruent fashion. This came to a halt on April 10, and the move to $6.88 is a very negative development. Wheat remains on a short and intermediate term sell signal. We expect wheat to test the low made on April 1 of $6.59.
Stand aside.

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