U.S. crude prices for October delivery rose 2 cents to $68.07 a barrel by 11:44 a.m. EDT (1644 GMT), after earlier reaching a high of $69.40 on U.S. stock gains and a weaker dollar.

London Brent crude was down 32 cents at $67.34 a barrel.

“Right now, there’s not a whole lot of momentum here in either direction. I think the trend for the week, which has been down, is still in force,” said Tom Bentz, senior commodity analyst, BNP Paribas commodity Futures Inc in New York.

“Everything seemed to kind of slip right after the jobs data,” he added.

U.S. jobless claims fell last week, according to a report released by the Department of Labor on Thursday, but the prior week’s figure was revised up.

The number of people collecting long-term unemployment benefits rose to 6.23 million in the week ended Aug. 22, well above market expectations for 6.12 million.

U.S. stocks edged up on Thursday on better-than-expected sales from retailers in August.

The Institute for Supply Management released a report on Thursday showing that while the U.S. services sector shrank in August, an index measuring activity was at its highest in nearly a year.

RANGEBOUND

Oil prices are not likely to break out of the confines of the current range in the short term, analysts said.

U.S. crude prices have been rangebound, between $65 to $75 a barrel since the start of August, fluctuating on the latest clues about the speed of an impending economic recovery.

“There isn’t the structural tightness for the market to break out of this range,” said Petromatrix analyst Olivier Jakob, pointing to brimming global distillates such as diesel stored on land and at sea.

Traders were also eyeing news that big oil producers are increasing output. Russian oil output hit a record high in August, nearing 10 million barrels per day as the country launched a new giant field.

OPEC is expected to leave output targets unchanged when it next meets on Sept. 9 in Vienna.

Sept 3 (Reuters)

U.S. crude for October delivery fell $1.39 to $68.57 a barrel by 1:32 p.m. EDT (1732 GMT).

London Brent crude dropped $1.38 to $68.27.

U.S. stocks dropped as investors’ confidence in the economic recovery wavered.

“The dollar is strengthening and equities are coming off hard so (oil futures) did the same,” said Tom Knight, trader at Truman Arnold in Texarkana, Texas.

Meanwhile, the U.S. dollar rose as the slide in the U.S. stocks boosted the currency’s safe-haven appeal.

Oil futures had risen earlier in the day as the market focused on a report showing a jump in U.S. manufacturing and pending home sales.

“It looks like the whole complex is failing to sustain the gains … basically, the market’s not done yet on the downside,” said Tom Bentz, senior commodity analyst, BNP Paribas Commodity Futures Inc in New York.

Oil has risen from a low of $32.40 in December, helped by economic recovery optimism that lifted global stocks <.MIWD00000PUS> to 10-month highs last month.

U.S. DATA

Oil traders will look for fresh direction from U.S. weekly crude stockpiles data.

Analysts expect the data to show a 600,000-barrel fall in U.S. crude stocks following an increase in refinery utilization, a preliminary Reuters poll of analysts showed.

The American Petroleum Institute (API) will release its weekly inventory report at 4:30 p.m. EDT (2030 GMT) on Tuesday. The U.S. Energy Information Administration (EIA) will release its data on Wednesday at 10:30 a.m. EDT.

Adding to already high inventories, OPEC has reduced its compliance with agreed production curbs, a Reuters survey on Tuesday found.

OPEC supply in August rose for a fourth consecutive month as Saudi Arabia, Nigeria and Venezuela increased their production, taking overall output discipline to 68 percent from a revised 70 percent in July.

The Organization of the Petroleum Exporting Countries meets on Sept. 9 in Vienna to reconsider its output policy.

Sept 1 (Reuters)

As we’ve mentioned before, these products are heavily dependent on the weather for their yield. So if erratic weather patterns affect the crops’ growing cycles, it’s very likely that their prices will rise.

These products aren’t just consumables either. The farmers and food/drink companies that are front-and-center of their production use these markets for income production, too. They do this by using commodity futures and options contracts as hedging mechanisms.

So let’s hit the grains market first…

How To Play The Grain Market Upside With Commodity Futures

A few weeks ago, we keyed in on corn and wheat, stating: “Most of the speculators who play these markets are bullish in nature, so a majority of them are placing bullish bets, either in the form of outright long futures contracts or long call option contracts.

“Right now might be one of the best times to get into the grain markets on the long side because not only are we right smack in the middle of summer, but the prices of corn and wheat have just undergone a five-week massacre to the downside.”

Both commodities markets are still meandering around their lows, which offers another good opportunity to get in on a speculative bullish move. Here’s how to do it…

Take a look at the daily charts below for the corn and wheat December 2009 futures contracts.

If you believe in the seasonality of bullish moves for the grains, and are willing to take a speculative bet, now is a good time to consider a trade.

Your best bet is to hit the futures options contracts that trade on the floor of the Chicago Board Of Trade (CBOT). But make sure you do so in a way that gives you limited risk and unlimited reward possibilities.

For example, that could include entering a call option spread or just buying call options.

For call options, look to play the December 2009 or March 2010 options expirations, which will give enough time for any major weather scares to produce a good upside run.

• Corn: Specifically, consider December 2009 & March 2010 call options with strike price levels from $3.50 and higher.
• Wheat: Use the December 2009 and March 2010 call options that have strike prices between $5.60 and $5.80, or higher.

You can also trade these contracts through the Chicago Mercantile Exchange’s electronic platform, where you can bypass the brokers in the option pits. These contracts are exactly the same as the other, so you can trade them whichever way works best for you.

The Orange Juice Markets – A Hot Spot For Speculators

Having last broken down the orange juice market one month ago, this market has become a hot spot for speculators, as hurricane season got underway.

At the time, the market had carved out a low and we mentioned that it was shaping up for a “potentially lucrative seasonal trade.”

It certainly didn’t disappoint. Over a two-week period, orange juice futures launched higher to the tune of 2700 points. Usually, a move like that will take a good portion of the summer to develop, but with the oversold conditions that existed, it was stronger and quicker than normal.

This served all call option buyers well – especially those who took our advice to buy the January 2010 $85 cent call options. At the time, these options were available to buy for roughly 900 points or lower. And with the 2700-point surge, they tripled in price, fetching prices of over 3000 points.

So what now?

At this point, we wouldn’t advise buying these options anymore. The feverish move has already happened now and OJ prices are beginning to fall back. This is usually a one-time event every year, and unless orange juice drops back down into the low 80-cent area quickly (based on the January 2010 futures), we don’t recommend buying calls at this time. Markets move fast and timing is very crucial.

Let’s take a quick look at our other favorite “weather-prone” commodity – natural gas…

Commodity Futures – Waiting on a Natural Gas Bull

We’ve been bullish on natural gas for a while now, as it slinks along the lows it’s carved out since it reached manic highs last summer (along with many other commodities).

Natural gas will eventually hit a bottom, as it’s an in-demand natural resource that will be around for a long time. We just have to wait patiently for the turnaround, as the market grapples with high underground storage supplies.

Like with the orange juice market, though, we know hurricanes can cause huge upside moves, as the majority of drilling rigs are centered in the Gulf of Mexico. If a few storms go rumbling through that area, it could be the impetus that eventually brings this commodity out of the doldrums. But until then, we’ll bide our time.

One of the ways we’re playing this market in my Instant Money Trader (IMT) service is by selling out-of-the-money naked put option contracts on the natural gas exchange-traded fund -United States Natural Gas (NYSE: UNG).

This ETF tracks the movements of natural gas futures contracts, giving investors a lower cost way to enter this market.

And by selling put options, it allows us to collect the option premium, while having an opportunity to buy natural gas at unbelievably low historical levels. Check out this article for more information on how to sell put options.

Source: Commodity Futures: Playing The Grains & Orange Juice Markets

U.S. oil futures rose towards $36 a barrel on Friday, snapping a five-day losing streak ahead of the expected approval of a $789 billion stimulus package by the U.S. Congress to help dig the economy out of recession.

The Democratic-controlled House of Representatives and Senate were expected later on Friday to approve the emergency package to create or save 3.5 million jobs and hand President Barack Obama a big political victory.

The United States is the world’s biggest oil consumer and the economic slowdown that started in the U.S. housing market more than a year ago has undermined energy demand, sending shock waves through the oil market.

Oil prices have fallen more than 70 percent from their peak at almost $150 a barrel last year as economic downturn has spread to all regions of the world.

U.S. crude for March delivery rose $1.84 to $35.82 a barrel by 1611 GMT, after falling $1.96 in the previous session to settle at $33.98 a barrel, its lowest since Dec. 19.

London Brent crude for the new front-month of April fell 73 cents to $45.30 a barrel.

The Brent March contract expired on Thursday at $44.65, extending its premium to U.S. crude to more than $10, mainly due to a glut at the main U.S. storage hub in Oklahoma.

But the Brent premium for the April contract was less than $4, and some analysts expect inventories to ease eventually at Cushing, Oklahoma, the delivery point for the U.S. futures contract, based on West Texas Intermediate (WTI) crude.

OIL DEMAND CONTRACTING

“It looks like a bounce on stimulus hopes, but only concentrated on the two front-months,” said Tom Bentz, analyst at BNP Paribas Commodity Futures.

The Organization of the Petroleum Exporting Countries said on Friday world oil demand would contract more sharply than expected this year due to the economic crisis.

Making a possible case for further supply cuts, OPEC said in its monthly report that global demand would fall by 580,000 barrels per day (bpd) in 2009 to average 85.13 million bpd. Its previous forecast was for demand to contract by 180,000 bpd.

OPEC, which pumps more than a third of the world’s oil, has agreed at meetings since September to cut its oil output by 4.2 million bpd, equal to 5 percent of daily world demand, to combat the slump in prices and demand.

The report said OPEC still had more to do in delivering existing output promises, suggesting OPEC met 65 percent of its pledge to lower output, according to a Reuters calculation based on the OPEC data.

U.S. oil prices have lost about 14 percent this week and are languishing at a three-week low, pressured by persistent demand worries and doubts over the efficacy of the U.S. government’s banks rescue plan.

Oil’s losses on Thursday were exacerbated by news that the number of people staying on unemployment benefits in the United States rose by 11,000 to a record of 4.810 million in the last week of January.

In the short term, analysts believe the market’s direction would be influenced by movements in stock markets.

European stocks rose on Friday, supported by reports of the imminent passage of Washington’s stimulus package. U.S. stock futures also signalled that Wall Street would open higher, also buoyed by the plan.

LONDON, Feb 13 (Reuters)

Stocks of distillates grew by 6.4 million barrels last week amid weak demand, while crude and gasoline inventories also rose, the Energy Information Administration said.

“Inventories continue to build. This morning we had negative sales numbers. This is more economic weakness affecting demand,” said Tom Bentz of BNP Paribas Commodity Futures in New York.

U.S. crude was down $2.08 at $35.70 a barrel by 1618 GMT after earlier hitting a high of $39.45. London Brent crude fell 88 cents to $43.95 a barrel.

The inventory report added further pressure to prices after weak U.S. retail sales data sparked selling earlier in the session.

The U.S. Commerce Department said total retail sales fell 2.7 percent to a seasonally adjusted $343.2 billion last month. Analysts polled by Reuters had forecast December retail sales falling 1.2 percent.

“The retail sales figures are horrible. They confirm that the United States is in recession, which means oil demand is falling and so the market is weakening,” said Rob Laughlin, senior oil analyst at MF Global.

The global financial crisis, the worst since the 1930s, has pushed much of the industrialised world into recession, causing oil demand to slump and crude prices to tumble by more than $100 from its record peak of above $147 a barrel last July.

Oil producers in the Organization of the Petroleum Exporting Countries have responded to the recession by cutting output.

Top exporter Saudi Arabia said on Tuesday it was prepared to go even further than cuts it had made since December if the market warranted it, while OPEC’s secretary general said the group may reduce oil output again at its meeting in March.

Libya’s top oil official said on Wednesday OPEC’s existing oil output cuts should support oil prices and that it was too early to tell if a further production reduction.

OPEC decided to cut supply by 2 million bpd at meetings in September and October. In December, it agreed to lower output by a further 2.2 million bpd as of Jan. 1, a record reduction.

So far OPEC’s moves have had little obvious impact on the market and oil for prompt delivery is trading at a big discount to future barrels with the market in what is called a contango.

The front-month U.S. crude contract is also at a record discount to North Sea Brent crude futures with a spread of nore than $8 a barrel between the two contracts.

LONDON, Jan 14 (Reuters)

Now even Hugh Hefner is having trouble making money from his adult brand of publishing. His Playboy publishing and media empire posted a quarterly loss on weaker TV and publishing revenues reports Yahoo Finance. “The worse-than-expected results illustrate the trouble that Playboy and other publishers and television companies face as more people get their entertainment online, and often for free.”

And that’s the beauty of the ‘net for consumer. A lot of what you fancy with little of what you don’t i.e. paying for stuff. Not so great for the publishers who have been struggling to figure out how to make the internet pay. Expect to see a culling of national newspaper as they stop printing in the next few years and as for TV, well one glance at the schedules tells us the medium is beaten.

Returning for a moment to the subject of ballooning commodity prices… The week-end FT finds an indication of the increases in speculation – the futures market. Commodity futures have increased fivefold in the past three years says John Authors in the FT citing energy consultant, Philip Verleger.

Originally commodity futures were used as a hedging tool for producers against a change in prices, now they are considered an investment in their own right. And The Sunday Times’ David Smith notes “something odd” going on in the oil market following last week’s announcement of a large rise in crude stocks by the US Department of Energy. “Instead of falling, prices hit a new record.” A rampant bull on the charge..? Oil is down a little today to $125 against something unusual in recent times, a stronger dollar.

Continues below …

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And some news closer to home…

The damage caused by rampant commodity prices can be clearly seen in the latest government statistics. UK producer prices rose 7.5% year on year – their fastest pace since 1986. Comments Geoffrey Dicks, and economist with the Royal Bank of Scotland:

“There is a wall of costs out there waiting to dump on the U.K. consumer.”

Recent soundings of sentiment suggest consumers have a good idea of what’s coming. One such dumping looking to be coming soon are higher energy bills. They could rise as much as 46% this year reports The Telegraph.

As for the wider economy it will “skate close to recession” over the next 6-9 months says the British Chamber of Commerce in a new report. Quarterly growth will hover a little above 0% and if oil maintains its current elevated level expect 4% CPI inflation in the second half of the year. Against this backdrop, life doesn’t get any easier for Mervyn King and co trying to coax UK plc. back to at least trend growth with further cuts in interest rates.

More billions in bank losses, today… HSBC plc. revealed another $5bn in bad subprime debt and write downs to take its total losses up to $20bn (how they must rue buying US subprime lender Household International). The bank comments the US is likely to go into recession this year and doesn’t see a US housing market recovery until next year.

On the subject of house price crashes, research from Goldman Sachs finds this is the first suffered in the US since the 1970s based on their definition of a 15% fall in inflation-adjusted prices. During that period most other industrialised countries have suffered at least one and Canada, Finland, Germany, Italy, Japan, Korea Sweden

Switzerland and the UK have had two. Yes, there are still those of us around who remember the value of your home can fall as well as rise.

Finally, some news of our own. This week will be our last. The Daily Reckoning is closing on Saturday but dear readers will continue to hear from us on a daily basis as the Fleet Street Daily from next Monday.

Regards,

Rob Mackrill
The Daily Reckoning

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–If you think inflation of 4.2% per year in consumer prices is acceptable-as some pundits seem to think-remember the rule of 72. To find out how long it takes for something to double at given interest rate, you divide the number 72 by that interest rate (don’t ask us why 72 is used, it’s complicated).

–Growing at a rate of 4.2% compounded, a given good or service will double in price in 17.1 years. Granted, the rule of 72 is used to calculate returns on your capital. It helps you establish what rate of return you require on your capital to reach a given financial goal. The faster your rate of compounding the fast you get there. This is why Einstein called compound interest the “eighth wonder of the world” (bonus points if you can name the other seven).

–But we hope you see our point. Tolerating “just a little bit of inflation” seems to have become popular lately. But 4.2% is not “just a little bit of inflation.” Over your life time, it means that prices will double. This is how governments gradually tax your savings by printing more money. This is why fiat money is not “sound money.”

–Enough channeling of Murray Rothbard, though. What’s on tap in financial markets this week? Well, there is a view emerging in financial markets that the seven-year bear market in the U.S. dollar may be at an end. This view, if it can get some traction, would have big implications for commodity prices and Aussie resource shares.

–A rally in the dollar would take some steam out of oil prices for sure. We don’t believe that commodity prices are rising only because the dollar is weak, but we reckon quite a few international traders do, and will use a dollar rally to pare back their long positions in commodity futures and resource stocks like BHP Billiton and Rito Tinto.

–In point of fact, commodities are rising because demand is rising faster than supply. However that fact puts the dollar rally story in doubt and thus will probably be ignored. Dollar bulls have taken heart from last week’s Fed statement. It may indicate (depending on how you read it) that rate cuts are on hold in the U.S. If the ECB cuts and the Fed stands pat, presto! You have a dollar rally (at least against the euro).

–We have to admit, a mild dollar rally is not unimaginable. But let’s take a look at what the Fed actually said. Did it really reveal that its chief concern is now inflation and that it’s become hawkish? Hardly.

–This is all the Fed said about inflation: “Uncertainty about the inflation outlook remains high. It will be necessary to continue to monitor inflation developments carefully.”

–Yes. Yes, of course. “We’ll be keeping an eye on the inflation figures while we expand the money supply and take any sort of garbage collateral the banks can throw our way.” The great asset-laundering scheme continues.

–The market either didn’t notice or didn’t care that after its statement on interest rates, the Fed got even more deeply involved in the credit crisis by offering more loans to the banks through two of its newly established “facilities.”

–There’s a famous poem we want to introduce you to that you may not have heard of in this part of the world. It’s called “The New Colossus” by an American named Emma Lazarus. It’s the poem that appears on the base of the Statue of Liberty. We thought of it today when trying to explain what the Fed is doing:

Not like the brazen giant of Greek fame,
With conquering limbs astride from land to land;
Here at our sea-washed, sunset gates shall stand
A mighty woman with a torch, whose flame
Is the imprisoned lightning, and her name
Mother of Exiles. From her beacon-hand
Glows world-wide welcome; her mild eyes command
The air-bridged harbor that twin cities frame.
“Keep ancient lands, your storied pomp!” cries she
With silent lips. “Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tossed to me,
I lift my lamp beside the golden door!”

–The Fed has become the mother of all credit exiles, accepting Wall Street’s over-valued, under-performing, dead-beat loans. At least that is what it’s done in a metaphorical sense. What did it do practically?

–First the Fed increased by US$25 billion the amount of money it will auction to banks (commercial and investment) through its Term Auction Facility (TAF). Here banker people, borrow more. Please.

–Second, the Fed expanded the list of collateral it will accept for asset-swapping through its Term Securities Lending (Facility). Remember, that’s the one that lets banks and prime brokers swap mortgage-backed securities for Treasury bonds for up to 28-days.

–The Fed is now expanding that list of asset-backed securities to include collateralized car loans, credit card receivables, and student loans. It’s doing so because the lack of demand for bonds backed by those assets has had a real political impact in an election year. Students can’t get loans for American universities because investors won’t buy bonds issued by the banks who made the loans to the students. No funding, no college.

–We don’t know if you are as agitated reading about the Fed loan programs as we are writing about them. It’s pretty agitating. You have to translate what the Fed has done from Central Bank speak to what it really means.

–What it really means is that that the Fed has lowered interest rates as far as it can to deal with the bank lending crisis. It still hasn’t encouraged banks to loan to each other, or investors to buy bonds backed by various kinds of consumer liabilities. But it HAS had some effects.

–Remember last week we said the interest rate on U.S. Treasury bonds is below the rate of inflation? Well, American real estate speculator Sam Zell says this has lured some investors back into the market for residential mortgage-backed securities. “Is it in large volumes? No. Is it the natural first step in the evolution? Yes.”

–The evolution of what? New credit markets? A credit market where the Fed trashes the yield on U.S. government debt in order to make the yield on mortgage-backed debt look less trashy? One asset might look less trashy in a side-by-side comparison. But for investors, isn’t this like choosing which leper you’d like to take home and introduce to your mother?

–Our take is this: the Fed has probably stopped cutting rates for awhile because it’s apparent that cutting rates has not solved the problem in the credit markets. That problem is still the same: poor asset quality. But even on that score, not everyone agrees.

–”Credit markets are likely to overstate significantly the losses that will ultimately be felt by the financial system and the economy as a whole… They will exaggerate to an even greater extent the potential damage to the real economy,” the Bank of England reported last week in its Stability Report. This from the people who brought the nationalisation of Northern Rock.

–More tomorrow on whether the BOE is full of it tomorrow (and the earnings growth for Aussie banks). But with China ready to rest its manufacturing sector in June to begin clearing the air for the Olympic Games in August, and with the rate cut outlook seeming to favour the dollar over the euro, we reckon that resource prices could be in for a bit of a lull.

–The good news about that is that resource shares might be in for a lull too. And with the fundamental earnings case for these shares being pretty darn good, that means the next few months could be a great time to establish entry points in some of your favourite resource stocks. We’re making our list and checking it twice, are you?