What Had Crude Oil Boiling Again Overnight?

• The Tuesday morning Tolstoy Timeline remains intact with headlines again screaming “War” while the US president's social media subscribers wait for notification of when he will again say “Peace”. 

• US crude oil climbed above $84 overnight while diesel fuel (distillates) added as much as 9.25 cents. 

• Grains were relatively quiet pre-dawn Tuesday as another storm system makes its way across the US Midwest. 

Morning Summary: I reversed the order of my usual morning routine Tuesday, this time looking at the headlines before running the traps of the various sectors of the commodity complex. What I saw made me laugh, though it shouldn’t. One would think I’d be used to it by now. But there it was, under another comical picture, “U.S. and Iran trade reparation demands as Hormuz deal hopes fade”. A glance to the right-hand side of the page and I see, “U.S. oil tops $84 as Hormuz deal hopes dwindle and deadlock deepens” (nice alliteration by the editors, by the way) and “Treasury yields up as oil prices jump…”. The cherry on top of all this had to be, “Zelensky warns Russia is preparing for escalation as North Korea boosts support”. All that was missing was a mention of China and the whole gang would be together (the US president, Vlad the Invader, China’s Xi, North Korea’s Kim). After closing $3.95 (5.0%) higher Monday, the spot-month WTI contract (CLU26) added as much as $2.48 (3.0%) overnight, hitting a high of $84.61, and was sitting $1.86 higher at this writing. Gold (GCZ26) was up a mere $14 to start the day after gaining as much as $75.30 (1.7%). 

Corn: The corn market was quietly higher to start another day. The December issue (ZCZ26) posted a 3.0-cent trading range overnight, from up 2.5 cents to down 0.5 cent on trade volume of fewer than 20,000 contracts as of this writing and was sitting 1.5 cents in the green pre-dawn. A look at the quote screen shows both March and May also up 1.5 cents, neither registering 2,000 contracts traded overnight. Tuesday morning’s radar shows shows more rain working its way across Iowa, with today’s forecast indicating the system is expected to hold together and intensify as it makes its way east of the Mississippi River. The only part of these weather maps that could be considered bullish, if they are to be believed, would be harvest slowing rains across the US southeast. A look back at Monday afternoon and evening and we see September closed 0.75 cent in the red with December down 0.25 cent. It’s interesting to note September lost 44,000 contracts of open interest while December gained only 14,300 contracts. This tells me Watson is getting out of September longs but not rolling out to December. Meanwhile, the National Corn Index came in at $4.11, down about 1.0 cent for the day. 

Soybeans: The oilseed sub-sector was similar to where we left it Monday afternoon with markets mostly in the green, the outlier once again soybean meal. The spot-month diesel fuel (distillates) contract (HOU26) was up 6.25 cents (1.5%) at this writing after gaining as much as 9.25 cents overnight. December soybean oil (ZLZ26) was sitting 0.2 cent (0.3%) higher to start the day after rallying as much as 0.36 cent on moderate-to-light trade volume of 7,500 contracts. As for soybeans, while I was typing the intro to this segment the November issue (ZSX26) slipped from fractionally higher to fractionally lower, a move that was exciting as it sounds. Nov was showing trade volume of about 10,000 contracts as it posted a 4.75-cent trading range overnight, from up 3.25 cents to down 1.5 cents. By all appearances, it does not look like the world’s largest buyer was in the market this time around the clock. Weather-wise, new-crop soybeans are looking at the same daily forecast maps, with the latest 6-to-10-day, for August 16 to 20, showing mostly above normal temperature and precipitation for much of the US Plains and Midwest. Recall Nov26 closed 3.25 cents higher Monday, followed by the National Soybean Index coming in 4.25 cents higher for the day. 

Wheat: The wheat sub-sector was green again early Tuesday morning, the overnight round of buying possibly tied to the latest Russia-Ukraine headlines. Or maybe not. The world has been dealing with the latest illegal invasion by Russia’s Vlad the past 4.5 years, the cards of the global wheat game reshuffled and dealt many times, usually leaving the US holding a foldable hand. But as market bulls like to repeat as a mantra, maybe this time will be different. The key to the sub-sector, particularly during this off-season (post winter wheat harvest, pre winter wheat planting of next year’s crop), could be the current (my apologies Tony D.) net-short futures position held by Watson in the SRW market. Last Friday’s Commitments of Traders report showed this position to be 14,760 contracts, an increase of 12,770 contracts from the previous week. The December issue closed 1.0 cent higher Monday, putting it 2.0 cents higher for the Tuesday-to-Tuesday positioning week heading into today’s session. This indicates there has been some short covering along the way. Total open interest in SRW wheat was down 6,500 contracts since last Tuesday’s settlement. For the record, December SRW (ZWZ26) was up 5.75 cents while Dec HRW (KEZ26) as sitting 7.0 cents in the green pre-dawn.