The oil trade has become tedious with a bigger dose of monotonous heaped inside. Not even another conflict with Iran or a drawdown in oil inventory could wake this boring market up out of its tedious movements. Perhaps that may change as the dollar is springing back to life and we get oil inventories and reports that Mexico’s PEMEX is going to spend 134 million dollars on a great oil hedge. Along with that, traders may look at other outside commodity markets that are showing some signs of stress.

The API did report an 897,000 barrel drop in crude oil supply and an even larger 1.97 million barrel drop in Cushing, Oklahoma. Of course some of that drop was because refiners were ramping up gasoline production, allowing those supplies to increase by an impressive 4.45 million barrels. Distillates did fall by a modest 36.000 barrels. So, it was really a mixed bag not really helping the bulls or those bears and encouraging a big rise in malaise to what is almost a disgusting level.

As oversold as oil is, you would think we might get at least a little bounce from geo-political risk stories. Fox News reported that a, "U.S. Navy destroyer had another close encounter with an Iranian Revolutionary Guard "fast attack craft" in the Persian Gulf Monday. Two U.S. officials tell Fox News that the Iranian ship came within 1,000 yards of the guided missile destroyer USS Mahan with its weapons manned. The officials said the Mahan altered course to avoid the Iranian warship, sounded the danger signal, fired flares and manned its own weapons. The Iranian ship did not come closer than 1,000 yards and no warning shots were fired. "Coming inbound at a high rate of speed like that and manning weapons, despite clear warnings from the ship, is obviously provocative behavior," said one American official in describing the Iranian actions.

Mexico is hedging on whether oil prices have peaked or not. The FT reports that Pemex, Mexico’s state oil company, has spent $133.5m on a hedging program, the first in its history, to protect its balance sheet from falling crude prices. The FT says that since 2005, Mexico’s finance ministry has conducted an annual hedging program. It is the market’s largest such oil trade and usually shrouded in secrecy. Pemex’s program was not expected to change that. (It has done a good job with that in the past) “The two things have nothing to do with one another,” a spokeswoman said, indicating that the ministry hedge would go ahead as usual. A Pemex spokesman concurred that the two operations “are complementary”. “The finance ministry’s hedge is to protect direct government income and this hedge is directly to protect our income to meet the financial balance goal,” he said. The size of the two operations is also wildly different. The government has spent an average of about $1.0 billion a year on its oil hedge for the past decade, and last year netted $2.65 billion from the program. The Pemex hedge covers a maximum of 409,000 barrels per day for the May to December period at a price of $42 per barrel, that being the target price established in the budget for 2017.

Natural gas is stalling straight ahead of tomorrow’s injection report. We are looking for a 67 bcf injection but that won’t be enough to remove supply tightness concerns in this structurally short market.

Lumber went thud in the aftermath of the Trump Tarif. The reason was that the market had been anticipating the move for some time. Canadian lumber producers have already been raising prices for months in anticipation of the retroactive tax.

Copper concerns? BHP cuts its 2017 guidance for copper and iron ore according to the FT. Freeport cut its production targets after a problem with the Indonesia government.

Rain makes grain but also slows planting. Despite the farmer’s progress being better than expected as the farmers seem to be moving around the raindrops, it appears that the outlook is looking a bit wet. The grain markets seemed to get support on renewed late planting reports. WX Risk reports there were 2 areas of significant rain in the last 24 hrs. One area was over northern Minnesota and the eastern half of North Dakota (and some of this was snow). Rainfall amounts range from 0.25 -1.0"/ 6-25mm and the coverage was 60 to 70%. The second area of moderate rain fell over eastern Wyoming and the western half of Nebraska as well as far southwestern South Dakota. Rainfall amounts here were a little heavier range from 0.25 -1.5" 6-38mm and again the coverage was 60-70%.