This post is a guest contribution by Dian Chu*, market analyst, trader and author of the Economic Forecasts and Opinions blog.

Last Friday, US crude oil futures finished above $78, the highest level in a year, surging more than 9% during the past week making it the largest weekly gain since the height of the summer driving season, even though the US continues to sit on ample supply of petroleum.

Given the continued sluggishness of the economy, high unemployment rate and large amounts of excess oil production capacity around the world, analysts said a sudden upward spike was still unlikely, while others are predicting an immanent correction down below $70.

However, if you take a closer look, it is evident that the current crude oil market is almost entirely detached from fundamentals. Furthermore, there are several factors supporting oil rising to new levels, as fundamentals are

...

 

United States Commodity Funds LLC has launched a new exchange-traded fund designed to provide short exposure to the crude oil market.

The United States Short Oil Fund (NYSEArca: DNO) aims to capture the inverse of the daily return of the front-month West Texas Intermediate crude oil futures contract, as traded on the New York Mercantile Exchange.

On a one-day basis, the fund should mirror the returns of the popular United States Crude Oil Fund (NYSEArca: USO). Over longer time frames, the returns may diverge due to compounding. (For more on the impact of compounding on returns, check here or here.)

DNO will charge 0.60% in annual expenses.

Unlike most leveraged and inverse products, DNO will not use swaps to achieve its exposure. Instead, it will take short positions in the actual underlying futures contracts.

DNO will compete directly with the PowerShares DB Crude Oil Short ETN (NYSEArca: SZO), a short oil

...

U.S. stocks fell on Monday as a resurgent U.S. dollar took a toll on commodity prices and investors paused to gauge if the outlook for corporate profits justified the market’s recent run to 11-month highs.

Caterpillar Inc , down 2.5 percent, was among the top drags after the maker of bulldozers, excavators and other products said worldwide August sales of machinery to dealerships fell.

Crude oil futures shed 3.5 percent to $69.48 a barrel and spot gold prices dropped below $1,000 an ounce. The S&P materials <.GSPM> index fell nearly 2 percent.

Shares of Exxon Mobil Corp declined 1 percent to $69.26, while gold miner Newmont Mining Corp shed 3.1 percent to $43.55.

The Dow Jones industrial average <.DJI> lost 55.85 points, or 0.57 percent, to 9,764.35. The Standard & Poor’s 500 Index <.SPX> declined 6.64 points, or 0.62 percent, to 1,061.66. The Nasdaq Composite Index <.IXIC> dipped 6.77 points, or 0.32 percent, to 2,126.09.

The Nasdaq’s losses were curbed

...

Deutsche Bank AG (DB) yesterday announced that it will redeem all of its most bullish oil exchange-traded notes (ETNs), as the U.S. government plans to set stricter regulations in the commodities markets.   Deutsche said it would redeem outstanding PowerShares DB Crude Oil Double Long Exchange Traded Notes worth around $425 million. Deutsche plans to provide notice of the redemption on Sept 9.   Exchange-traded notes are one of Deutsche's several exchange-traded products allowing investors to bet on moves in crude oil futures and are designed to return double the amount of any gain in WTI crude futures. Deutsche is redeeming the leveraged notes due to stricter position limits for energy futures held on NYMEX and other exchanges.   The U.S. Commodities Futures Trading Commission has been inclined towards placing more restrictions on exchange-traded funds and other investment vehicles that buy commodities futures. Managers of exchange-traded funds and ...

In the last few columns, we’ve focused on sectors that typically see lots of action during the summertime. Most notably, this includes the “grains” (corn, wheat, soybeans), the “softs” (orange juice), and even natural gas. When you have commodities that are so susceptible to weather, you often see dramatic moves in one day, only for it to unwind the next day.

Take corn, for example. Prices rallied strongly early last week on drier than expected weather conditions, only to lose all of those gains by Friday.

But rather than lament situations like these that cause such erratic price movements, they actually offer a chance to profit. As I’ve said in the last few columns, the grain markets make for good speculative bullish trades, as they’re not only at the mercy of the weather, but are also trading at their most

...

Oil fell below $65 a barrel on Wednesday, curbing a week of gains after data showing an unexpected rise in U.S. crude stocks suggested demand in the world’s top energy consumer was still weak.

The market awaited U.S. Energy Information Administration (EIA) data due at 1430 GMT to see if they would confirm the trend from Tuesday’s American Petroleum Institute (API) figures.

U.S. crude oil for September delivery was down 90 cents at $64.71 a barrel by 1407 GMT, having fallen to a low of $63.76. London Brent crude for September lost 50 cents to $66.37.

The fall followed five days of rises that had pushed U.S. crude oil futures up more than 10 percent in just a week.

“The market has exhausted itself and needs to pause,” VTB Capital analyst Andrey Kryuchenkov said in a research note. “Today, all attention will be on the weekly U.S. fuel inventories.”

U.S. crude oil stockpiles rose unexpectedly

...

Whether it’s heading up or down, the oil market usually asserts itself as the leader of the commodities world.  Having plunged from levels around $130 per barrel this time last year all the way down to the $40s, the market has spent the last couple of months striking to the upside again.

As I’ve mentioned in recent issues, oil had near-term targets of $70 in its sights. It hasn’t disappointed, shooting past the $73 mark late last week - a level not seen since the first week of November 2008.

On a technical basis, because oil has not only moved above, but also stayed above all the major moving averages (including the all-important 200-day average), it’s now got $80 in its sights. If any pullback is going to occur, which should happen after solid runs like this, the move down should hold at the $65 per barrel range.

On a fundamental note, we’ve

...

Another wise guy takes pot shots at all ETFs and finds an audience in a sea of misinformation.

Yesterday, I was forwarded a blog that was published on Seeking Alpha (where we sometimes publish our own blogs). The author of the article is a certain bow-tie-wearing blogger named Neil George.

Here is a link to the blog—“Why ETFs Are A Scam”—in its entirety. It's really must-reading.

The article is so full of misleading information and flat-out factual errors that it is hard to know where to begin.

Let’s start with the first line of the email from the person who forwarded the blog to me (a friend who I know buys ETFs and works around the ETF business). He says, “This guy has some valid points.”

Unfortunately, when I forwarded it around to my email colleagues, my first line was, “This guy is a nut case.”

Because I honestly believe that George’s blog post,

...

The base metals were all flying high on Thursday. Copper was flat until just after the New York open, but then took off and rose nearly unbroken straight through the day to finish barely off its intraday highs at $2.2733/lb., up nearly 9 cents.

Nickel followed copper closely, nearly ending its intraday high at $6.5726/lb., up 33 cents. Zinc’s path, too, was similar, as it closed at $0.7059/lb., up almost 3 cents. Aluminum went vertical in the afternoon, adding 5½ cents, to $0.6464/lb., while lead completed the comeback day by tacking on nearly 3¼ cents, to $0.748/lb.

The rout suffered by the base metals on Wednesday was completely turned around a day later, as copper led the sector in a retracement that erased all of their losses, and then some.

“Copper was driven higher by outside market support — renewed dollar weakness, rally in crude oil futures, and a quietly higher

...

Crude-oil futures fell Tuesday on expectations that the Organization of Petroleum Exporting Countries will not cut production quotas at a Thursday meeting.

Losses in oil, however, were limited by data that showed a jump in U.S. consumer confidence.

Crude for July delivery fell 24 cents, or 0.4%, to $61.43 a barrel on the New York Mercantile Exchange. It fell to $59.53 earlier, moving below $60 for the first time since May 20. The loss came after it rallied more than 8% last week, mainly boosted by a weaker dollar.

“Further comments that there will not be a production cut at this week’s OPEC meeting may be weighing on oil prices,” said Brenda Sullivan, an analyst at Sucden Financial Research.

Saudi Arabia’s Oil Minister Ali Naimi Tuesday reiterated his desire for OPEC to “stay the course” with its production and called for better compliance with

…