Hey, Hey, did oil ever think there might be another way? To just feel better, just feel better about today. Oh no, if you never want to shop, to turn and drive away, You might feel better, might feel better if you stay. Oh no, it’s about feelings! Yikes. Nothing more than feelings, (Yuck) trying to forget those feelings of bull. How are you feeling today oh random consumer! Are you feeling confident today! Oh not sure the weather is lousy! Confidence is shattered and oil falls. Green shoots get shot in the head as traders ran away from the long side of the market because the consumers were just not feeling it. After two straight months of gains the Conference Board said that its Consumer Confidence Index plunged from Mays reading of 54.8 to a whimpering 49.3. This drop in confidence shook the confidence of the bulls that not only had to deal with overhead resistance but also the expiration on the petroleum product future.
Well that is at least until the American Petroleum Institute showed that sometimes confidence is a hard thing to measure. Confidence may be falling but it may be at a time when demand is rising. A shocking bullish API report might indicate that demand for oil is stronger than you might believe. The API wowed by reporting a stunning 6.82 million barrels drop! The API also reported a smaller than expected increase of 209,000 barrel in crude supply and an increase of 723,000 barrels of distillate. Based of these numbers it appears that the Conference Board may have spoken to the wrong people or at least caught them on a bad hair day.
And it is not just US demand that is attracting attention it is signs of rebounding demand in China. We spoke of China’s plans to increase their SPR by 60%. Now today as Bloomberg News reports,“China’s manufacturing expanded for a fourth month as a 4 trillion yuan ($585 billion) stimulus plan and record bank lending revive the world’s third-largest economy. The official Purchasing Managers’ Index rose to a seasonally adjusted 53.2 in June from 53.1 in May” the Federation of Logistics and Purchasing said today in Beijing in an e-mailed statement. A reading above 50 indicates an expansion. After the report, the Shanghai Composite Index rose above 3000 points for the first time in a year, copper gained and the yen fell as the report added to signs that the global economy may be over the worst of its slump. China’s economy may keep improving in the third and fourth quarters, enabling the nation to meet its 8 percent economic growth target for this year.These types of numbers coming out of China are putting to rest the thought that their recent commodity demand surge was a temporary situation. These numbers seem to indicate a significant and sustainable turnaround in China commodity demand appetite. As in the past for oil, traders will only ignore these signs at their own peril. Underestimating China over the past few decades has been the curse of many a commodity bear.
Also did you know that Alaron trading is no longer going to be Alaron! We are now a division of PFG Best Research! Are you with the best? Find out! Call me at 800-935-6487 or email me at pflynn@alaron.com to open your account. Also see me today and every day on the only business station that really matters and that is the Fox Business Network!!!
Buy August crude at 6700 - stop 6500.
Buy August heating oil at 16800 - stop 16300.
Buy August RBOB at 17800 - stop 16900.
We’re long August natural gas from apprx 384 - stop 377.
