Monday, January 24, 2011

OPEC to Increase Production, Oil Services Companies Show a Jump in Profits

It appears we will start the week with a pull back in crude oil prices as Saudi Arabian Oil Minister Ali al-Naimi released a statement that OPEC will increase supply to meet what seems to be inevitable increased demand coming out of China and India. Our "friends" at Goldman Sachs are saying this only indicates that OPEC is using it's spare production supply and should only further the bulls story.

We personally have learned to not let Goldman Sachs lead the way in our oil trading but you also can't ignore it. While retail investors have less effect on oil markets then some other sectors, Goldman Sachs can increase that interest with their apparent media attention grabbing abilities.

But it's North American demand that is making most hedge funds and commercial buyers take a bigger interest in the "crude oil bull story" this week as a report from Commodity Futures Trading Commission showed that these investors have ramped up their net long positions 0.4 percent in crude contracts in the week ended Jan. 18th.

The oil services sector is giving traders additional confidence as Schlumberger reported better than expected quarterly profit on Friday followed by Haliburton releasing fourth quarter reports showing their net profit rose to $605 million, or .66 cents per share, from $243 million, or 27 cents per share, a year earlier. Revenue jumped 40 percent to $5.16 billion in the quarter after analysts had expected revenues to be $4.88 billion.

So do we open Monday morning selling the news on these companies? It's the numbers we trust and here's what we are using for Mondays trading......

Crude oil was lower overnight as it extends last week's decline. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term. Closes below the reaction low crossing at 88.45 would confirm that a short term top has been posted. If March renews this winter's rally, weekly resistance crossing at 93.87 is the next upside target. First resistance is this year's high crossing at 93.46. Second resistance is weekly resistance crossing at 93.87. First support is the reaction low crossing at 88.45. Second support is the reaction low crossing at 88.07. Crude oil pivot point for Monday morning is 89.40.

Natural gas as it extends the rally off October's low. Stochastics and the RSI are overbought but remain bullish signaling that sideways to higher prices are possible near term. If March extends the rally off October's low, the 62% retracement level of the June-October decline crossing at 5.025 is the next upside target. Closes below the 20 day moving average crossing at 4.478 are needed to confirm that a short term top has been posted. First resistance is the overnight high crossing at 4.823. Second resistance is the 62% retracement level of the June-October decline crossing at 5.025. First support is the 10 day moving average crossing at 4.554. Second support is the 20 day moving average crossing at 4.478. Natural gas pivot point for Monday morning is 4.719.

Gold was higher due to short covering overnight as it consolidates some of this month's decline. Stochastics and the RSI are oversold but remain bearish signaling that sideways to lower prices are possible. If February extends this month's decline, the reaction low crossing at 1331.10 is the next downside target. Closes above the 20 day moving average crossing at 1380.40 are needed to confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 1366.30. Second resistance is the 20 day moving average crossing at 1388.40. First support is last Friday's low crossing at 1337.00. Second support is the reaction low crossing at 1331.10. Gold pivot point for Monday morning is 1342.60.


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