<h1>Commodities Today: Energy, Brazil And Utility Stocks Remain Volatile</h1>

Summary

......It seems that investors may have to deal with further issues from Ukraine and Russia, as the US and Germany are prepared to provide weaponry to Ukraine.
......Energy names are falling sharply today as oil prices test the $50/barrel level.
......There are reports that SD is set to reduce its rig count in the Mississippi Lime play by about 75%.

While the market was able to shake off what President Obama and German Chancellor Angela Merkel said yesterday regarding Russia and Ukraine, we think that investors need to plan for any unexpected news events. While the sanctions against Russia have worked quickly, the success of the program belongs more with falling oil prices than with the economic sanctions. It seems that the US and its allies are close to giving the Ukrainians lethal weaponry to use for defensive purposes, and how the Russians react to that will be quite interesting. Russia has a tendency to stand by its allies, and although the rest of the world sees the separatists in Ukraine as rebels and terrorists, Russia sees them as friends and allies.

Chart of the Day:

Utilities have taken a hit recently as investors worry about the impact of higher rates on utility stocks. Obviously, higher rates are not ideal for investors, but we think that everything should be put into perspective. Bonds will become the least attractive investment for those seeking yield, and the utilities will be announcing growing revenues and profits as the economy picks up. Looking at capital flows, we would expect to see a shift in how investors are allocating funds moving forward and will allocate capital currently earmarked for fixed income to equities which offer stable outlooks and the opportunity to participate in a rising stock market.

The chart below of the Utilities Select Sector SPDR ETF (NYSEARCA: XLU ) highlights the big move lower we have seen recently.

Source: BigCharts


*Gold: $1,236.40/ounce, down by $5.10/ ounce
*Silver: $17.005/ounce, down by $0.065/ ounce
*Oil: $50.88/barrel, down by $1.98/barrel
*RBOB Gas: $1.5543/gallon, down by $ 0.0239/gallon
*Natural Gas: $2.712/MMbtu, up by $ 0.115/MMbtu
*Copper: $2.5445/pound, down by $ 0.036/pound
*Platinum: $1,211.90/ounce, down by $ 8.50/ounce

Oil Leading The Way Lower

With oil prices heading back towards the all-important $50/barrel level here in the United States, the same names that led the way higher are now leading the way lower. The names catching our eye today are Goodrich Petroleum (NYSE: GDP ), Linn Energy (NASDAQ: LINE ), LinnCo (NASDAQ: LNCO ) and Oasis Petroleum (NYSE: OAS). Much like the coal names captured the attention of speculators during the intense volatility that industry saw as prices collapsed, the oil names are witnessing the exact same thing now.

While this volatility is great for day-traders and the HFT machine run funds, it is also an opportunity for long-term investors to set up positions. It has become apparent that the highly leveraged shale drillers and MLP E&Ps will get whipped around as the oil market works towards finding an equilibrium point, and those dips, such as today's, will provide opportunities to put new cash to work.

SandRidge Shares Lower On Rig Count Cut

Generally speaking, each E&P company which has come out and lowered capital expenditure plans has been rewarded by the market for being conservative with its cash. That is until yesterday when Reuters reported that it had obtained a document which indicated that SandRidge Energy (NYSE: SD ) was planning on cutting its rig count in Oklahoma and Kansas by about 75%. The company, according to the document and report, will now only have 8 rigs operating in the area which is down from the current rig count of 28. Now, we will obviously have to wait for an announcement to see how this will affect production moving forward, but the move did catch the market off guard if only because of the sheer size of the cut.

Investors Are Staying Away From Brazilian Stocks

Now that ETFs are so popular and efficient to run, many large investors use ETFs linked to certain indices, industries and sectors to essentially trade a handful of companies. Individual investors simply sell their holdings to get rid of the exposure, but more sophisticated traders look to the leveraged ETFs, both the long and short names, to place their bets. With this in mind, we have to wonder if a sort of contagion has occurred as it relates to Brazilian stocks due to the issues at Petrobras (NYSE: PBR) and the country's exposure to the commodity market. Recently, Petrobras has tended to lead the way up or down for Brazilian stocks, including big names such as Vale (NYSE: VALE). Both Petrobras and Vale are down about 5.3% today.