Bloomberg Access:{OIAR<GO>}

WTI crude oil:

June WTI crude oil lost $1.18 on volume of 1,173,017 contracts. Volume increased substantially from the day before, May 1 when the June contract lost 49 cents on volume of 678,024 contracts and total open interest increased by 9,582. On May 2, total open interest increased again, this time by 16,657 contracts, which relative to volume is approximately 40% below average, but the open interest increase on yesterday’s decline confirms that short-sellers continue to pile in to WTI crude oil. The June contract gained 7,639 of open interest.

As this report is being compiled after the release of the EIA storage report, the June contract is trading nearly unchanged on the day and has made a slightly lower low of $47.30 which takes out yesterday’s print of 47.35. Today’s low for the June contract takes out 47.58 made on March 22 and is the lowest print since 47.23 made on November 15, 2016. On April 24, OIA announced that June WTI generated a short term sell signal and remains on an intermediate term sell. Stand aside.

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 0.9 million barrels from the previous week. At 527.8 million barrels, U.S. crude oil inventories are near the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 0.2 million barrels last week, and are near the upper limit of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories decreased by 0.6 million barrels last week but are in the upper half of the average range for this time of year. Propane/propylene inventories increased slightly but remained virtually unchanged from last week and are in the lower half of the average range. Total commercial petroleum inventories increased by 1.3 million barrels last week.

Gold: On May 2, June New York gold generated a short term sell signal and remains on an intermediate term buy signal.

June New York gold advanced $1.50 on volume of 196,202 contracts. Total open interest declined by 3,431, which relative to volume is approximately 25% below average. As this report is being compiled on May 3, the June contract is trading $8.40 lower or -0.68% and has made a daily low of 1245.60, which is the lowest print since 1245.40 made on April 5.

The COT report released last Friday revealed that managed money added 8,393 to their long positions and liquidated 751 of their short positions. Commercial interests added just 41 contracts to their long positions and also added 1,935 to their short positions. As of the April 25 tabulation date, managed money was long gold by ratio of 4.41:1, up from the previous week of 4.17:1 and the ratio two weeks ago of 3.84:1.

Three weeks ago, managed money was long by ratio of 3.01:1. In summary there are large numbers of speculators who are heavily long gold and will provide fuel for the continued downside move. We expect that an intermediate term sell signal will be generated and for this to occur, the daily high must be below OIA’s key pivot point for May 3 of $1240.10. We have no recommendation.

Corn:

July corn lost 5.25 cents on volume of 349,484 contracts. Total open interest increase by 3,264 contracts, which relative to volume is approximately 50% below average. The May 2017 contract lost 901 of open interest. Yesterday’s open interest increase confirms that short-sellers were willing to enter the market, although they were unable to drive prices below 3.70 1/4, which was above the May 1 print of 3.69 1/2.

We think it is inevitable that July corn will generate a short term buy signal and for this to occur the low of the day must be above OIA’s key pivot point for May 3 of 3.73 3/4. Stand aside.

Kansas City wheat: On May 2, July Kansas City wheat generated an intermediate term buy signal after generating a short term buy signal on May 1.

July Kansas City wheat advanced 2.00 cents on heavy volume of 77,438 contracts. Although volume was strong, it was below the previous day’s (May 1) when 105,352 contracts were traded and the July contract gained 28.50 cents and total open interest declined by 1,697.

On May 2, total open interest declined by massive 11,454 contracts, which relative to volume is approximately 450% above average meaning liquidation was off the charts. The May contract accounted for a loss of 568 of open interest. As this report is being compiled on May 3, the July Kansas City contract is having one of its rare pullbacks, down 4.50 cents on low volume and has not taken out yesterday’s high for the move of 4.74 3/4. We have no recommendation.

Soybean oil: July soybean oil will generate a short term buy signal on May 3. It remains on an intermediate term sell signal.

July soybean oil advanced 46 points on volume of 98,796 contracts. Total open interest increased by 926 contracts, which relative to volume is approximately 50% below average. However, the May contract lost 811 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in May and increase total open interest.

Yesterday’s action follows the very positive action on May 1 when the July contract gained 45 points on volume the 63,888 contracts and total open interest skyrocketed by 5,346. As pointed out in yesterday’s report, managed money is short by a ratio of 1.58:1, though this is down from the previous week of 1.83:1 and the ratio two weeks ago of 1.92:1. Soybean oil will act to support soybean prices and we are becoming increasingly friendly to soybeans. We much prefer the long side of soybeans to soybean oil at this time.

Soybeans: On May 2, July soybeans generated a short term buy signal, and remains on an intermediate term sell signal. 

July soybeans lost 1.50 cents on light volume of 151,284 contracts. Total open interest increased by 624 contracts, which relative to volume is approximately 80% below average. The May contract lost 1,636 of open interest, and in yesterday’s trading the July contract made a high of 9.78 1/2, which is the highest print since 9.771/4 made on March 31.

Aside from the generation of the buy signal, we like the seasonal factors favoring increasing soybean prices and the grain complex will help support the move.  Chicago and Kansas City wheat are on buy signals and today soybean oil, with soybean meal and corn to follow in the next couple of days. Additionally, managed money is short the entire grain complex and collectively they will add fuel to the upside move.We recommend the initiation of bullish positions on May 3. Please call for specific recommendations and exit points.