Catch a falling knife and put it in your pocket and save it for a rainy day. One day after commodities started the month of August getting crushed today it seems that at least someone is willing to catch a falling knife. The commodity rebound is being led by oil, the same commodity that led the entire commodity complex into the abyss. Oil prices are starting to rebound after the Shanghai Composite closed higher and copper bounced back as it flirted with bear market territory and just a general sense that maybe the selloff was overdone.
Yesterday, bond yields soared as money ran to get away from rampant deflation. Gold prices are staying fir as record net shorts try to continue to press the market. Commodity producer Australia is allowing its currency RBOB futures get crushed but a rebound in crude is helping a recovery. We are also getting support from a Dow Jones report that Phillips 66 (NYSE:PSX) on Tuesday reported a disruption to operations and flaring of gas from its Borger Refinery in the Texas panhandle. The refinery, which can process 73,000 barrels of crude a day, reported the "process upset" in a filing to the Texas Commission on Environmental Quality. It said the above-average gas releases began and ended Sunday night, without providing further details.
Once again while it may be too early, at some point energy traders might ponder the damage that we are seeing to the production side. The last time we saw a drop like this we started an unprecedented drop in rig counts. We are already hearing energy companies start to pull back spending at a record clip. And we still don't have Iranian oil as of yet. We should get a rebound in August. Maybe late August but August none the less.
Natural gas has been strong on hot weather. The Wall Street Journal reported that "A hot spring has already led power plants to consume their second-highest amount of natural gas ever for the month of May, the U.S. Energy Information Administration said late Friday. It reported that gas deliveries to power plants hit 23.7 billion cubic feet a day that month, nearly 14% more than May 2014.