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

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1 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, UNLEADED GAS -180 CRUDE OIL MARKET FUNDAMENTALS: While July crude oil rejected a downside breakout below Monday's low yesterday and effectively scored a five day high "closing value" in a move that shifts the technical picture from definitively bearish to slightly less bearish we can't get upbeat toward near term price prospects! In fact the fear of excess US supply continues to hang over the market as does generally negative gasoline charts and lingering fears that certain world producers like Libya, Iraq and Nigeria are expanding output enough to countervail the producer's cut agreement impact. With the API posting a surprise build in crude oil inventories last night that should temper expectations for this morning's EIA crude stocks decline. An issue that provides fresh overhead resistance to energy prices is a forecast from British Petroleum pointing to sluggish global demand and softer than anticipated Chinese consumption in annual projections. However some of the negative spin from the BP forecasts was counter veiled by IEA suggestions overnight that Indian and Chinese demand would drive global oil demand ahead. Unfortunately for the bull camp the IEA also indicated that world oil stocks will not fall to the hoped for level by the end of the production cut agreement. While the trade is supported by IEA news that Saudi exports will continue to decline, the trade has to be disappointed with news from the IEA that Iraqi compliance of production cuts this year might only be 55%. Another element weighing on prices today is IEA news that US crude supply will grow by 430,000 barrels per day this year, which is an increase of 90,000 barrels per day over prior forecasts. All things considered supply hangs over the market especially if crude stocks today rise by more than 2 million barrels. PRODUCT MARKET FUNDAMENTALS: As indicated in the crude oil coverage today, the charts in the gasoline market remain troublesome for the bull camp as another lower low for the move and the lowest low since the early May spike low yesterday would seem to leave the path of least resistance pointing downward. In fact a build in gasoline inventories from the API of 1.8 million barrels yesterday suggests today's EIA data might be bearish. However, the market has started to flesh out a consolidation low zone in the July gasoline contract around the $ area, and since we suspect the net spec and fund long in gasoline has come down significantly a return to the May lows might be less aggressive. Fortunately for the bull camp, the trade generally expects EIA gasoline inventories to decline this week and we would suggest the implied gasoline demand reading will recover from the disappointing measure released last week. As with crude oil, however, a major private survey showed a surprise build in gasoline stocks that has put RBOB prices under early pressure. It could take a series of bullish fundamental developments, additional risk on psychology in equities, a weaker US dollar, an "on hold" Fed and favorable leadership from crude oil just to pull July unleaded gas prices significantly up and away from the $1.50 level. Weekly EIA Petroleum Estimates - Week Ending 6/9/ In Million Barrels High Estimate Low Estimate Stocks Last Week Stocks Change Last Week Crude Oil Distillates

2 Gasoline NATURAL GAS: July natural gas broke below the $3.000 level and settled at $2.966, down 1.9% on the day yesterday as the heat in the East Coast and Midwest looks to push west and allows normal to below normal temperatures for the June 19th to 27th timeframe according to the National Weather Service. The trade should see another sizeable injection in Thursday's EIA inventory report with estimates coming in at 89 bcf increase compared to the five year average of an 87 bcf increase. A Bloomberg index of dominant natural gas producers was up 3.9% and traded to the highest level since May 24th. Range Resources and Cabot oil & Gas were among the leaders in the S&P index yesterday. After a bearish outside day lower close on Monday, the market followed through to the downside yesterday. The market also closed below trend line support at yesterday. The next level of support is the February low at followed by the November low at The tail end of the speculative length should be exiting out of long positions, and we would rather look to buy breaks at these levels rather than sell rallies. As in the unleaded gasoline market, July crude oil has started to flesh out a consolidation low support zone around the $45.64 level and a decline in open interest/volume could suggest the bear camp is less interested in pressing the downside. However, the bull camp will need to see countervailing news to the ongoing idea of burdensome production and slower than anticipated balancing of the world oil supply situation. While the trade generally expects to see a decline in EIA weekly crude oil stocks, seeing a build in crude stocks today will probably put prices quickly back to last week's lows around $ OTHER ENERGY CHARTS: ENERGY COMPLEX TECHNICAL OUTLOOK: CRUDE OIL (JUL) 06/14/2017: Daily stochastics declining into oversold territory suggest the selling may be drying up soon. The market's short-term trend is negative as the close remains below the 9-day moving average. The upside closing price reversal on the daily chart is somewhat bullish. 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 47.28, while 1st support hits today at and below there at HEATING OIL (JUL) 06/14/2017: Daily stochastics are trending lower but have declined into oversold territory. A negative signal for trend short-term was given on a close under the 9-bar moving average. The upside closing price reversal on the daily chart is somewhat bullish. A positive setup occurred with the close over the 1st swing resistance. The next downside objective is now at The next area of resistance is around and , while 1st support hits today at and below there at RBOB GAS (JUL) 06/14/2017: Daily stochastics declining into oversold territory suggest the selling may be drying up soon. The market's short-term trend is negative as the close remains below the 9-day moving average. The

3 daily closing price reversal up is a positive indicator that could support higher prices. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next downside target is The next area of resistance is around and , while 1st support hits today at and below there at NATURAL GAS (JUL) 06/14/2017: The daily stochastics gave a bearish indicator with a crossover down. Momentum studies are still bearish but are now at oversold levels and will tend to support reversal action if it occurs. The market's short-term trend is negative as the close remains below the 9-day moving average. The close below the 1st swing support could weigh on the market. The next downside target is now at Some caution in pressing the downside is warranted with the RSI under 30. The next area of resistance is around and 3.102, 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 CLAN CLAQ HOAN HOAQ RBAN RBAQ NGAN NGAQ DAILY SWING STATISTICS Contract Support 2 Support 1 Pivot Resist 1 Resist 2 ENERGY COMPLEX CLAN7 Crude Oil CLAQ7 Crude Oil HOAN7 Heating Oil HOAQ7 Heating Oil RBAN7 RBOB Gas RBAQ7 RBOB Gas NGAN7 Natural Gas NGAQ7 Natural Gas DAILY COCOA COMMENTARY Short-term peak may be in place without supply help Cocoa remains on a bumpy ride as the last four sessions have averaged an 81 point price range. After an early rally to a new 3 1/2 week high, July cocoa came under significant pressure yesterday before finishing with a sizable loss. Global markets are starting to regain a "risk on" tone that may encourage some traders to re-establish short positions in cocoa. Cocoa's near-term supply outlook has fueled a bearish stance by many traders, but that may be diminishing as the West African mid-crop harvest goes on. Weather issues over the last few weeks may start to have an impact on the region's near-term output, and may encourage another look at lofty full-season production estimates. Citigroup cut their 2016/17 global production surplus estimate to 325,000 tonnes from a previous estimate of 395,000 tonnes, and also see stronger global consumption this season due to the low price

4 environment. For next season's (2017/18) cocoa crop, Citigroup forecast a global production surplus between 175,000 to 200,000 tonnes with an increase in world cocoa stocks to grindings ratio to 46.6%. It may take more evidence that West African output is slowing down to shift the cocoa market into a bullish supply outlook. Given the market still has a sizable net spec short position, it would not take much in the way of bullish supply news for prices to retest the mid-may highs. Near-term resistance for July cocoa is at 2070 while key support emerges at 1961 and COCOA TECHNICAL OUTLOOK: COCOA (JUL) 06/14/2017: 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 downside closing price reversal on the daily chart is somewhat negative. The market's close below the 1st swing support number suggests a moderately negative setup for today. The near-term upside target is at The next area of resistance is around 2060 and 2110, while 1st support hits today at 1984 and below there at DAILY COFFEE COMMENTARY Still no sign of low; big exchange stocks; next year's Brazil The market has consolidated in the first half of June and remains in an oversold condition. The market may have the supply news to hold support but this may depend on the macro situation which seems to be improving for much of the world but still questionable from Brazil. The Brazil currency pushed to the lowest level since May 19th. The market found fresh pressure yesterday as concerns from cold weather in Brazil over the weekend have subsided. After today, Brazil's key Arabica-growing region of south Minas Gerais will have mostly dry weather forecast through the middle of next week that should get their harvest back to full speed. A report from the International Coffee Organization outlines a negative outlook due to a market that will remain well supplied from world producers. Brazil is looking at an "off-year" crop this season, while there is an uncertain outlook towards the improvement in upcoming Vietnamese production. However, Colombia's annual output should remain well above 14 million bags while Central American and East African production is showing improvement. ICE exchange coffee stocks continue to grow as they jumped by another 6,095 bags on Tuesday. At this point, ICE exchange stocks are now on-track for a sixth monthly increase in a row of 2% or larger, which would be the first time that has occurred since the end of Sluggish demand continues to weigh heavily on the coffee market, and will do so until there are consistent daily drawdowns in ICE exchange coffee stocks. Unless there are fresh weather issues for the Brazilian harvest, coffee is looking more likely to drop down into new low ground. July coffee has critical near-term support at while resistance is at News lows would leave as next support.

5 COFFEE TECHNICAL OUTLOOK: COFFEE (JUL) 06/14/2017: Daily stochastics are showing positive momentum from oversold levels, which should reinforce a move higher if near term resistance is taken out. The market's close below the 9-day moving average is an indication the short-term trend remains negative. The market setup is somewhat negative with the close under the 1st swing support. The next upside target is The next area of resistance is around and , while 1st support hits today at and below there at DAILY COTTON COMMENTARY No sign of low but extreme oversold condition; crop good Perhaps a rally in grains might help trigger at least a short-term technical recovery bounce but the trend remains down. The cotton market remains in a steady downtrend with further losses on the session yesterday. The news flow continues with a bearish tilt as US crop conditions continue to improve, import demand from India looks to decline sharply for the coming season due to a much larger crop, and world supplies look more plentiful for the new crop season. Excluding the sharp drop in stocks from China, world ending stocks from other countries are expected to increase 7.42 million bales. At the end of the 2017/18 season, China ending stocks (after a 9 million bale drop) still represent 103.5% of annual usage. China sold 19,300 tons of cotton at auction from state reserves which was 64.6% of what was offered. Technically, the close under this week for July cotton leaves next key support all the way down at Improving crop conditions in Texas and the possibility of some light rains in the Lubbock Texas region this week is seen as a negative factor. The market remains extremely oversold basis traditional technical indicators with stochastic measures at 7.22 on Tuesday. The market remains vulnerable to a technical correction but significant technical damage has occurred in the past few weeks, speculators hold a huge net long position with the market at the lowest level since January 24th and traders are concerned that US acreage may be higher than expected. Close-in resistance for July cotton is at and 76.04, with and as next downside targets. COTTON TECHNICAL OUTLOOK: COTTON (JUL) 06/14/2017: Momentum studies are still bearish but are now at oversold levels and will tend to support reversal action if it occurs. The market's short-term trend is negative as the close remains below the 9- day moving average. The close below the 2nd swing support number puts the market on the defensive. The next downside target is now at Some caution in pressing the downside is warranted with the RSI under 30. The next area of resistance is around and 75.43, while 1st support hits today at and below there at COTTON (DEC) 06/14/2017: Momentum studies are still bearish but are now at oversold levels and will tend to support reversal action if it occurs. The market's close below the 9-day moving average is an indication the short-

6 term trend remains negative. The close below the 2nd swing support number puts the market on the defensive. The next downside target is The next area of resistance is around and 72.62, while 1st support hits today at and below there at DAILY SUGAR COMMENTARY Resumption of downtrend leaves as next target The downside break-out overnight leaves as next target for July sugar. The Brazilian harvest is already running behind last season's pace but the shortterm weather looks favorable and the Brazil currency pushed down to the lowest level since mid-may to help pressure. The Brazilian trade group Unica pegged their nation's Center-South region's sugar production during the second half of May at 1.75 million tonnes versus 1.69 million last year over the same period. However, this was above trade forecasts despite the fact that wet weather caused several days of harvesting and crushing delays. Sugar cane crushing dropped to million tonnes from million last year but also came in above trade forecasts, while ethanol output fell to 1.2 billion liters from 1.45 billion last year. Brazilian mills turned 52.55% of the cane into ethanol versus 58.23% last year, indicating that the fall of sugar prices close to parity with ethanol has not curbed the production of sugar so far this season. The lack of a frost issue for cane in Brazil plus the weak currency plus sluggish global demand is a bearish set-up short-term for sugar. With the prospect that recent wet weather could boost sugar yields for later-harvested cane, Brazil's sugar production may still come in at the higher end of estimates. July sugar resistance is at and 14.08, with and as next support. SUGAR TECHNICAL OUTLOOK: SUGAR (JUL) 06/14/2017: A crossover down in the daily stochastics is a bearish signal. Daily stochastics are trending lower but have declined into oversold territory. The market's close below the 9-day moving average is an indication the short-term trend remains negative. It is a slightly negative indicator that the close was under the swing pivot. The next downside target is Some caution in pressing the downside is warranted with the RSI under 30. The next area of resistance is around and 14.16, while 1st support hits today at and below there at OJ TECHNICAL OUTLOOK: ORANGE JUICE (JUL) 06/14/2017: Stochastics are at mid-range but trending higher, which should reinforce a move higher if resistance levels are taken out. The market's short-term trend is positive on the close above the 9- day moving average. With the close over the 1st swing resistance number, the market is in a moderately positive position. 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

7 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 CTAN CTAZ CCAN OJAN KCAN MAN DAILY SWING STATISTICS Contract Support 2 Support 1 Pivot Resist 1 Resist 2 SOFTS MARKETS COMPLEX SBAN7 Sugar CTAN7 Cotton CTAZ7 Cotton CCAN7 Cocoa OJAN7 Orange Juice KCAN7 Coffee MAN7 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 EFUTURES.COM. is strictly prohibited.