Energy Market Update 5.12.16

Energy gains continue. On Monday energy markets moved lower with little resistance as rumors of the Canadian oil producers getting back to action fueled a sell off.  Crude was down $1 plus and we we’re on our way to the short term $43 floor. Since that we have seen nothing but a vertical joy ride as we have reached the top of the latter tonight at 46.70 close. Technically there is one rung left 48.50, and after that we could see a significant jump. Today the EIA reported that the global demand story is back and we should anticipate growth to strip supply at a faster pace than previously anticipated. We are already seeing increased imports in the US for the first time in five years, but import reasons are debatable.  The once collective thought that at some point we see a number that makes production work and we see an end to production deterioration is being reconsidered or reframed as a story about crude production being a slow moving ship that will have trouble catching steam. The global demand picture is looking better but global supply is full, here in the US we saw the first crude draw in weeks not exactly a trend. Making it a very speculative play to get long at market heights. As an ag retailer it has been explained to me that the market doesn’t reward me to be right, it just crushes me when I am wrong. So as your energy advisor this puts me in a tough spot. Do we all get even and cover our needs for this coming fall season? next year?

My advice today is keep tanks full or cover 25% of your fall needs now. Spot basis is +.05 (not exactly a fire sale but we are in season) forward contract +.11, not much premium on the insurance cost. Then wait and see what $50 crude looks like. If we close north of $50, for more than a week get another 25% of your fall needs covered and wait for a mid-July pull back to consider the rest. Prices are still fairly low and this market doesn’t seem to want to retrace, I am afraid the bears have lost their grip.

If you have questions about the market or need information on fuel related info please send me a request by using our, “Request More Fuel Info Tab”. We are here to sell stuff, but information and conversation is free.

Thank you for reading,

Zach Winter

CHS Elburn Co., and its affiliates do not provide and do not intend to provide advice regarding the value or advisability of trading in “commodity interests” as defined in the Commodity Exchange Act, 7 U.S.C. §§ 1-25, et seq., as amended (the “CEA”), including futures contracts, swaps, commodity options, or any other activity which would cause CHS Elburn or any of its affiliates to be considered a commodity trading advisor under the CEA.  None of the information contained herein should be construed as trading or risk management advice.  Before undertaking any trading strategy, you should consult your own independent advisors.