PFGBEST Energy Comment

CHICAGO - Jul 6/12 - SNS -- Following is the energy futures comment from PFGBEST Research.

The Energy Report(7)

By Kevin Rosenberg

By Kevin Rosenberg,

PFGBEST

(800) 487-3581

krosenberg@pfgbest.com

Crude Oil:

Global Economic growth has dominated the energy markets this week, driving the market wildly in either direction. Negative data and the general fear of struggling economies drives prices lower, but only until government stimuli becomes a real possibility. With a stronger US dollar and hopes for aggressive government stimulus fading, August crude futures traded $0.44 lower on Thursday closing at $87.22 per barrel. Yesterday's US Energy Information Administration report showed a draw of 4.3 million barrels in oil stocks for the week ending 6/29, in stark comparison to analyst expectations of 1.4 million barrels. The EIA report also showed a rise of 151,000 barrels in gasoline stockpiles compared to an estimate of 500,000 barrels and a draw on distillates of 1.051 million barrels. The ensuing rally was short lived as most attributed the data to Tropical Storm Debby's impact on Gulf production.

The story is much the same today. Crude oil futures fell overnight reflecting concerns over struggling world economies and interest rate cuts by China and European Central Bank. A drop in overseas interest rates closes the gap between their own rates and those offered by the US, which in turn attracts investors to the US dollar and makes crude oil more costly to those using foreign currency.

Investors this morning were focused on June's non-farm payroll report as well as unemployment. Typically, lower unemployment means more people driving to work, more demand for crude oil and higher prices. Lower unemployment and an improving economic environment lessen the chance for government intervention, which has the effect of driving crude prices higher. Reflecting the conundrum stated earlier, poor economic data can have a dual effect on the market, driving prices lower until the possibility of stimulus surfaces. Entering the report August crude oil was down $1.70 trading in the $85.70 area. Analyst estimates of the reports were positive with a whisper number even more enthusiastic. Poor job data and unemployment at 8.2% quickly broke prices toward the $85.00 mark. At the time of this writing, 8:00AM Central time, we have pierced through the $84.50 level. Positive analyst expectations coupled with unexpectedly negative data has resulted in strong downside pressure this morning.

Technicals: Healthy volume, strong stochastics and an RSI reading of 49.93 all lend support to August Crude futures. A close above our last pivot also implies strength.

CLQ2 (7/5/12)

R2- $89.10

R1- $88.81

Pivot- $87.57

S1- $86.33

S2 - $86.03

Reports (All Central time):

7/6 @ 07:30: Unemployment

7/6 @ 09:30: EIA Gas Storage

Kevin Rosenberg

PFGBEST Research Team

800.487.3581

krosenberg@pfgbest.com

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