Daily Energy and Soft Markets Commentary Friday April 20, 2018

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Daily Energy and Soft Markets Commentary Friday April 20, 2018 DAILY ENERGY COMPLEX COMMENTARY Overbought and vulnerable to normal back and fill OVERNIGHT CHANGES THROUGH 6:05 AM (CT): CRUDE -18,

1 Daily Energy and Soft Markets Commentary Friday April 20, 2018 DAILY ENERGY COMPLEX COMMENTARY Overbought and vulnerable to normal back and fill OVERNIGHT CHANGES THROUGH 6:05 AM (CT): CRUDE -18, HEATING OIL -34, UNLEADED GAS -9 CRUDE OIL MARKET FUNDAMENTALS: The energy markets continued to rise yesterday in the wake of comments from a world oil producer panel suggesting that the world oil glut has been "virtually eliminated". While the June crude oil contract is showing positive action early today the market remains significantly blow this week's high in a fashion that speaks of a poor finish to the trading week. However upside breakouts in crude oil, gasoline and heating oil this week, were accompanied by Brent crude prices reaching up to the highest level since the end of 2014 and that suggests bullishness is a worldwide condition. On the other hand with signs of heavy fund flows into crude oil around this week's highs it is possible that the market has become short term over extended. Furthermore suggestions from the President that oil prices are "artificially high" might give bear camp added confidence in extending the retrenchment from yesterday. However the markets might continue to benefit from the lofty price hopes from Saudi Arabia earlier this week especially with the energy stocks deficit readings in crude oil, gasoline, heating oil and distillates noted in this week's EIA report. On the other hand, given this week's low to high rally of four dollars per barrel, growing US rate hike fears and bearish spillover from a rising dollar, we would suggest that longs tighten profit stops to protect their positions and that aggressive traders look to sell 30 cent rallies. PRODUCT MARKET FUNDAMENTALS: Like the crude oil market, the gasoline market is also overbought from the April rally and from the sharp gains in the prior three days trade. In fact, June gasoline has forged a low to high rally this week of nearly 7 cents (3.4%) and that should leave the market vulnerable to technical corrective action. However the gasoline market should be emboldened by: this week's outsized decline in gasoline stocks, because of "record" implied gasoline demand readings and because gasoline stocks at Europe's Amsterdam, Rotterdam, and Antwerp (ARA) hub declined to million tons from 1.3 million tons in the prior week. For the week, ARA gas oil and jet fuel stocks also declined but fuel oil and Naphtha stocks built. It should also be noted that heating oil prices appear to be outperforming gasoline prices and while that is justified by the fact that heating demand has remained strong beyond normal seasonal patterns, that issue should begin to wane. On the other hand proof that heating demand continues to be very strong has also been seen in natural gas storage reports, with gas supplies continuing to draw down sharply at a time where supplies usually rebuild. NATURAL GAS: A large extension lower yesterday after the release of bullish news is a tell-tale sign of a market that was long and wrong. Furthermore a slight warm up ahead and the potential that the later than normal end to the withdrawal season was priced with the rally this week, leaves the bear camp with a number of negatives in their favor. However the weekly natural gas inventory report did show a "draw" of 36 bcf versus the five year average estimate of a usual 38 bcf "injection" for this week. Total storage stands at 1,299 bcf or 25.7% below the 5 year average. Over the last four weeks, natural gas storage has declined 147 bcf. With record production kicking in the last couple months and milder weather finally projected ahead, the trade seems to feel stocks will not have an issue replenishing and therefore prices look to slump further. EIA Natural Gas Storage Report Summary In Billion Cubic Feet

Week Total Change From 4 Week Combined Percent Change vs 5 Percent Change vs 10 Week Of Change Storage Last Year Weekly Change Year Average Year Average 4/13/2018-36 1299-808 -147-25.7% -25.

company, it feels as if crude oil prices have become temporarily overdone.

Keep in mind the record spec and fund long in the crude oil market is 811,538 contracts and the most recent COT spec long weighed in at 761,498 contracts and crude oil has rallied an additional $4.

2 Week Total Change From 4 Week Combined Percent Change vs 5 Percent Change vs 10 Week Of Change Storage Last Year Weekly Change Year Average Year Average 4/13/ % -25.8% While one can't account for the potential of a fresh supply threats from Russia and or the Middle East and there hasn't been much focus lately on the deteriorating situation at the Venezuelan oil company, it feels as if crude oil prices have become temporarily overdone. In fact, the approach and rejection of the psychologically important $70 level suggests the markets could be poised for some back and fill action. Keep in mind the record spec and fund long in the crude oil market is 811,538 contracts and the most recent COT spec long weighed in at 761,498 contracts and crude oil has rallied an additional $4.20, and therefore the market is probably approaching record long spec levels. In the end, with the steep/compacted range up action earlier this week there might be little in the way of support in June crude oil until the $67.68 level. On the other hand seeing prices rise back above $70 per barrel might result in new buyers chasing prices higher again. OTHER ENERGY CHARTS: ENERGY COMPLEX TECHNICAL OUTLOOK: CRUDE OIL (JUN) 04/20/2018: Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The market's short-term trend is positive on the close above the 9-day moving average. The daily closing price reversal down puts the market on the defensive. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next upside objective is The next area of resistance is around and 70.04, while 1st support hits today at and below there at HEATING OIL (JUN) 04/20/2018: Momentum studies are trending higher but have entered overbought levels. A positive signal for trend short-term was given on a close over the 9-bar moving average. It is a mildly bullish indicator that the market closed over the pivot swing number. The near-term upside target is at The next area of resistance is around and , while 1st support hits today at and below there at RBOB GAS (JUN) 04/20/2018: The rally brought the market to a new contract high. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. A positive signal for trend short-term was given on a close over the 9-bar moving average. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next upside target is The next area of resistance is around and , while 1st support hits today at and below there at NATURAL GAS (JUN) 04/20/2018: The close below the 40-day moving average is an indication the longer-term trend has turned down. The downside crossover (9 below 18) of the moving averages suggests a developing short-term downtrend. A crossover down in the daily stochastics is a bearish signal. Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. The market back below the 18-day

moving average suggests the intermediate-term trend could be turning down. The defensive setup, with the close under the 2nd swing support, could cause some early weakness.

3 moving average suggests the intermediate-term trend could be turning down. The defensive setup, with the close under the 2nd swing support, could cause some early weakness. The next downside objective is The next area of resistance is around and 2.806, while 1st support hits today at and below there at DAILY TECHNICAL STATISTICS 9 DAY RSI RSI STOCH D STOCH K 4 DAY 9 DAY 18 DAY 45 DAY 60 DAY CLOSE ENERGY COMPLEX CLAM CLAN HOAM HOAN RBAM RBAN NGAM NGAN DAILY SWING STATISTICS Contract Support 2 Support 1 Pivot Resist 1 Resist 2 ENERGY COMPLEX CLAM8 Crude Oil CLAN8 Crude Oil HOAM8 Heating Oil HOAN8 Heating Oil RBAM8 RBOB Gas RBAN8 RBOB Gas NGAM8 Natural Gas NGAN8 Natural Gas DAILY COCOA COMMENTARY Asia grind comes in strong but slow N America pace Cocoa prices remain in a steep uptrend and the market continues to find supply/demand support. With over 220 points in gains this week and with a 36% increase since the start of the year, cocoa prices may be vulnerable to end-ofweek profit-taking and long liquidation. July cocoa was unable to retest Wednesday's high for the move yesterday. In addition to the expectation for lower West African output this season, cocoa continued to find support from Wednesday's first quarter European grinding result that came in above the range of trade forecasts. After Thursday's close, first quarter North American cocoa grindings were released and showed a year-over-year decline of 1.14%. This was near the lower end of forecasts, and was the second quarter in a row with a negative year-over-year and fourth in the last six quarters. Asian first quarter grindings were up 7.2% from last year. The latest COT report will be released after today's close and will reflect a hefty 173 point price increase (6.8% higher) between measuring dates. The Asian first quarter grindings (up 7.2% from last year) were widely expected to be positive as that region has been seen as the "engine" for global demand growth. Even so, the negative North American grindings result may be enough to convince longs to take their profits and head to the sidelines in front of the weekend. July cocoa will

find near-term support at 2736 while resistance is at 2854. COCOA TECHNICAL OUTLOOK: COCOA (JUL) 04/20/2018: Momentum studies are trending higher but have entered overbought levels.

4 find near-term support at 2736 while resistance is at COCOA TECHNICAL OUTLOOK: COCOA (JUL) 04/20/2018: Momentum studies are trending higher but have entered overbought levels. The market's close above the 9-day moving average suggests the short-term trend remains positive. The market has a slightly positive tilt with the close over the swing pivot. The near-term upside objective is at The 9-day RSI over 70 indicates the market is approaching overbought levels. The next area of resistance is around 2826 and 2856, while 1st support hits today at 2772 and below there at DAILY COFFEE COMMENTARY Still no sign of low with talk of record Brazil crop soon Following Monday's downdraft, coffee prices have held inside of a fairly tight trading range. Coffee needs fresh bullish supply/demand news to lift clear of current price levels. Sucden raised their 2017/18 world coffee production forecast by 4.1 million bags to million, and also increased their Brazilian production estimate to million bags from 58.0 million previously. Decent weather over key Brazilian growing areas has been a factor in recent trade forecasts coming in around the 60 million bag level. ICE exchange coffee stocks rose by 6,978 bags on Thursday and are nearly even with their 2017 year-end total. The latest COT report will come out after today's close and will reflect a 3.70 cent price decline (3.1% lower) between measuring dates. This should result in a sizable increase to coffee's net spec short position that could put it close to or at a record high level. If there is a further build-up in negative risk sentiment, coffee's net spec short position could help to fuel significant short-covering. An increasing amount of traders and analysts are coming to terms with a 60 million bag or higher Brazilian crop, however, which will limit the market's ability to extend a recovery move. Near-term resistance for July coffee is at and then Support is at and COFFEE TECHNICAL OUTLOOK: COFFEE (JUL) 04/20/2018: Daily stochastics are trending lower but have declined into oversold territory. The market's short-term trend is negative as the close remains below the 9-day moving average. It is a slightly negative indicator that the close was lower than the pivot swing number. The next downside objective is The next area of resistance is around and , while 1st support hits today at and below there

at 114.67. DAILY COTTON COMMENTARY Holding well as very strong demand tone persists A positive tilt for demand continues to support the cotton market.

Given the very strong sales, however, the rally was pretty shallow but buyers were active overnight.

5 at DAILY COTTON COMMENTARY Holding well as very strong demand tone persists A positive tilt for demand continues to support the cotton market. The market managed to close a bit higher yesterday after very strong weekly export sales helped to slow the selling pressure. Given the very strong sales, however, the rally was pretty shallow but buyers were active overnight. Perhaps the market is close to pricing in the strong demand, but the continued strong pace suggests that the USDA will likely need to increase exports, and lower ending stocks in the May 10th supply/demand update. Weekly export sales came in at 290,200 bales for the current marketing year and 229,800 for the next marketing year for a total of 520,000 bales. As of April 12th, cumulative cotton sales stand at 110.1% of the USDA forecast for 2017/2018 (current) marketing year versus a 5 year average of 94.8%. The data would suggest a significant adjustment higher in exports is in order. Offsetting the outlook for tighter old crop ending stocks is the significant jump in planted area expected for the new season. While the US plantings are expected to jump, traders see a significant jump in soybean plantings in India in areas which were hit with boll worm issues for cotton last year. The market has yet to see much follow-through selling from the reversal action seen on Monday. The market still looks vulnerable to a break, but sideways action is another way to alleviate the overbought technical condition. Resistance for July cotton is at with close-in support at If support fails, look for a setback to at least COTTON TECHNICAL OUTLOOK: COTTON (MAY) 04/20/2018: Momentum studies are trending lower from high levels which should accelerate a move lower on a break below the 1st swing support. The market's close below the 9-day moving average is an indication the short-term trend remains negative. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next downside target is now at The next area of resistance is around and 83.51, while 1st support hits today at and below there at COTTON (JUL) 04/20/2018: A bearish signal was triggered on a crossover down in the daily stochastics. Daily stochastics turning lower from overbought levels is bearish and will tend to reinforce a downside break especially if near term support is penetrated. A negative signal for trend short-term was given on a close under the 9-bar moving average. The daily closing price reversal up is a positive indicator that could support higher prices. It is a mildly bullish indicator that the market closed over the pivot swing number. The next downside target is The next area of resistance is around and 83.40, while 1st support hits today at and below there at DAILY SUGAR COMMENTARY Still operating under the positive influence of reversal

6 Sugar prices continue to stay clear of this week's contract low, but may lose carryover support from energy markets going into the weekend. July sugar followed through on Wednesday's key reversal with a modest gain during Thursday's trading session that was a second positive daily result in a row. Both crude oil and RBOB fell back from new high for the move on Thursday, which could encourage long liquidation that in turn could weigh on sugar prices. US ethanol shipments to Brazil (which are subject to a 20% tariff if they are above quota) remain profitable this month. For the month of April, 260 million liters are expected in Brazil from the US compared to 320 million liters in March. While India should have a sizable exportable surplus this season, their mills are reluctant to export sugar unless they receive subsidies. The latest COT report will be released after today's close and will reflect a 37 tick price decline (3.0% lower) between measuring dates. This should result in a moderate increase in sugar's net spec short position that could put it at a record high level. Brazil's Center-South mills will emphasize ethanol production over sugar this season, but huge output from India and Thailand will continue to weigh on prices going forward. Near-term support for July sugar is at 11.84, with and as light resistance. SUGAR TECHNICAL OUTLOOK: SUGAR (JUL) 04/20/2018: The daily stochastics have crossed over up which is a bullish indication. Daily momentum studies are on the rise from low levels and should accelerate a move higher on a push through the 1st swing resistance. The close below the 9-day moving average is a negative short-term indicator for trend. The close over the pivot swing is a somewhat positive setup. The next upside target is The next area of resistance is around and 12.10, while 1st support hits today at and below there at OJ TECHNICAL OUTLOOK: ORANGE JUICE (MAY) 04/20/2018: Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The close above the 9-day moving average is a positive short-term indicator for trend. The close below the 1st swing support could weigh on the market. The next upside target is The next area of resistance is around and , while 1st support hits today at and below there at DAILY TECHNICAL STATISTICS STOCH D STOCH K 9 DAY 4 DAY 9 DAY 18 DAY 45 DAY 60 DAY CLOSE RSI RSI SOFTS MARKETS COMPLEX SBAN CTAK CTAN CCAN OJAK KCAN MAK

7 DAILY SWING STATISTICS Contract Support 2 Support 1 Pivot Resist 1 Resist 2 SOFTS MARKETS COMPLEX SBAN8 Sugar CTAK8 Cotton CTAN8 Cotton CCAN8 Cocoa OJAK8 Orange Juice KCAN8 Coffee MAK8 Milk This report includes information from sources believed to be reliable and accurate as of the date of this publication, but no independent verification has been made and we do not guarantee its accuracy or completeness. Opinions expressed are subject to change without notice. Any information or recommendation contained herein: (i) is not based on, or tailored to, the commodity interest or cash market positions or other circumstances or characterizations of particular investors or traders; (ii) is not customized or personalized for any such investor or trader; and (iii) does not take into consideration, among other things, risk tolerance, net worth, or available risk capital. Any use or reliance upon the information or recommendations is at the sole discretion and election of the subscriber. The risk of loss in trading futures contracts or commodity options can be substantial, and traders should carefully consider the inherent risks of such trading in light of their financial condition. Any reproduction or retransmission of this report without the express written consent of The Hightower Report is strictly prohibited.

Energy and Soft Markets Commentary Wednesday June 14, 2017 DAILY ENERGY COMPLEX COMMENTARY 06/14/17. The path of least resistance remains down

Energy and Soft Markets Commentary Wednesday June 14, 2017 DAILY ENERGY COMPLEX COMMENTARY The path of least resistance remains down OVERNIGHT CHANGES THROUGH 6:05 AM (CT): CRUDE -55, HEATING OIL -89,