Tuesday, October 30, 2012

WTI Crude Oil & Oil Stocks Seasonality & Year-End Outlook

By: Chris Vermeulen – The Gold & Oil Guy.com.....

Crude oil has had some large price swings this year and another one may be on its way. This report shows the seasonality of crude oil along with where oil is trading and what the oil service stocks are telling us is likely to happen going into year end.

Since WTI Crude Oil topped out in September at the $100 resistance level (Century Number) many traders are looking for a bounce or bottom to form in the next week. Historical charts show that on average the price of oil falls during November and the first half of December.

The charts of oil and oil stocks shown below have formed patterns on both time frames (weekly & daily) that lower prices are to be expected. If you did not read my Gold Seasonality Report I just posted be sure to review it here: Gold Seasonal Report

Crude Seasonality
  
WTI Crude Oil Weekly Chart:
Here you can see that price tends to fall going into Christmas and rallies during the last week of trading. This price action falls in line with Dimitri Specks seasonal chart providing us with insight as to what we should expect. Later this week I will finish my report on the Election Cycle Seasonality report which shows weakness in the market during Oct & Nov when a president is up for re-election.

Crude Oil Price

Oil Services Stocks – Weekly Chart: 
If you follow oil closely then you know likely know already that oil related stocks can lead the price of oil by a couple weeks. What this means is that if big money is flowing into oil stocks (bullish price patterns with strong volume), then you should expect the price of crude oil to rise in the coming days. That said, if money is flowing OUT of oils stocks then lower or sideways oil price should be expected.

The weekly chart oil stocks show a very large bearish head & shoulders pattern. While I do not think the neckline will be broken it is very possible.

One of the most important pieces of data on the chart is the VOLUME. Notice the lack of it… Volume tells us how much interest and power is behind chart patterns and declining volume clearly tells us these investments are out of favor currently and that big money is not moving into them.

Oil Stocks Weekly

Oil Services Stocks – DAILY Chart: 
Zooming into the daily chart of the oil service stocks we can see there is yet another bearish pattern unfolding. Another head & shoulders pattern which looks as though it is just starting to breakdown as of this writing. Next support level is $35-36.

Crude Oil Stocks Daily

WTI Crude Oil and Oil Service Stocks Trading Conclusion:
Looking forward 1-2 months (November – December) taking the seasonal price swings in oil, re-election cycle seasonality and price action of oil stocks I feel oil will trade sideways or down from here. With that being said, expect crude oil to rally during the last week of the year. I hope this provides some useful info for your trading!

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Chris Vermeulen is Founder of the popular trading analysis website The Gold & Oil Guy.com. There he shares his highly successful, low risk trade ideas. Since 2001 Chris has been a leader in teaching others to skillfully trade Currencies, Stock Indices, Bonds, Metals, Energies, Commodities, and Exchange Traded Funds.

Sunday, October 28, 2012

Is Santa Coming Early for Gold & Gold Mining Stocks?

By: Chris Vermeulen at The Gold & Oil Guy.com

If you own physical gold, gold mining stocks or plan on buying anything related to precious metals before year end, you are likely going to get excited because of what my analysis and outlook shows.

Since gold topped abruptly a year ago (Sept 2011) with a massive wave of selling which sent the price of gold from $1920 down to $1535, technical analysts knew that type of damage which had be done to the chart pattern could take a year or more to stabilize before gold would be able to continue higher.

Fast forwarding twelve months to today (Oct 2012). You can see that gold looks to have stabilized and is building a basing pattern (launch pad) for another major rally. The charts illustrated below show my big picture analysis, thoughts and investment idea.

Weekly Spot Gold Chart:
The weekly chart can be a very powerful tool for understanding the overall trend. This chart clearly shows the last major correction and basing pattern in gold back in 2008 – 2009. Right now gold looks to be forming a very similar pattern.

Keep in mind this is a weekly chart and if you compare the 2009 basing pattern to where we are today I still feel it could take 3 – 6 months before gold truly breaks out to the upside and kicks into high gear. The point of this chart is to provide a rough guide for what to expect in the coming weeks and months.

Gold Stock Investing


Weekly Chart of Junior Gold Miner Stocks:
If you follow gold closely then you likely already know junior gold mining stocks can lead the price of gold up to two weeks. Meaning gold mining stocks which you can track by looking at GDX and GDXJ exchange traded funds will form strong bullish chart patterns and generally start moving up in price before physical gold.

The chart below shows the junior gold miner ETF with a VERY BULLISH chart and volume pattern. Remember that gold stocks are a leveraged play on gold in most cases. For example, if gold moves up 1% we typically see GDX and GDXJ move 2-4%. Because they act as a leveraged play on physical gold smart money and big institutions start accumulating these investments in anticipation of gold rising.

GDXJ has formed a tight bull flag and the volume levels confirm there is big money moving into these investments. The first price target on GDXJ using technical analysis for a measured move points to the $32 area. Looking forward twelve months with gold trading above $2000 we could see this fund more than double in value.

Bonus: while most traders focus on GDX gold miner fund, I prefer the GDXJ fund because its almost identical in price performance BUT it pays you a 5% dividend....

Junior Gold Mining Stocks


Gold’s Seasonality: 
It’s that time of year again where gold tends to move higher. Below you can see where we are and what the price of gold typically does in November.

Gold Seasonality Trading


Gold Investing & Trading Conclusion:
Looking forward one month (November) and factoring in the recent pullback in gold to known support levels along with strong buying of junior gold mining stocks, I feel gold will take another run at the $1800 level and for GDXJ to test its previous higher of $25.50 at minimum. If both those levels get taken out then a massive bull market for precious metals could be triggered. Only time will tell.

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Chris Vermeulen

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Cold Snap Expected to Boost Heating Demand....Natural Gas Prices Jump to 11 Month High

Benchmark U.S. natural gas prices rose sharply over the past week, touching the highest levels in nearly 11 months, on expectations colder weather will stoke heating demand, the Energy Information Administration said.

Henry Hub gas as of October 24 was $3.43 per million British thermal units, up 19 cents from a week earlier. Prices at many trading points rose on "news of a coming cold snap," the EIA said. On October 22, Henry Hub gas hit $3.49, the highest since late November.

In NYMEX futures trading October 25, November gas fell 1.6 cents to $3.434, down 5.1% from $3.617 at the end of last week and the lowest settlement in nearly three weeks.

Gas prices were up even as above average temperatures in much of the U.S. tempered consumption. During the week ended October 24, total U.S. gas demand fell 2.9% from the previous week, led by a drop of 4.8% in residential and commercial use, with temperatures averaging about 1 degree Fahrenheit above normal.

Working natural gas in underground storage increased to 3.843 trillion cubic feet as of October 19, an implied net injection of 67 billion cubic feet from the previous week, 4.1% over year ago levels and 7% over the five-year average for that date.

Read the full report

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Commodities Next Week: Hurricane Sandy & Gas Prices

CNBC's Bertha Coombs discusses Friday's activity in the commodities markets and looks ahead to where oil and precious metals are likely headed next week.



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Saturday, October 27, 2012

ONG: Crude Oil Prices Recover as Hurricane Sandy Approaches Northeast U.S.

Commodity prices recovered after days of losses. Crude oil prices gained modestly after news reported that Hurricane Sandy headed for the US after impacting Cuba and UK’s GDP turned out better than expected. Meanwhile, sentiment was also lifted as US’ initial jobless claim fell more than consensus, signaling improvement in the employment market. The front month contract for WTI crude oil added +0.37% while the equivalent Brent crude contract climbed +0.59%. Gold also rebounded despite slippage of the euro with the benchmark Comex contract gaining +0.67%.

The US East Coast is threatened by Hurricane Sandy which already killed 21 people across the Caribbean. Meteorologist said that the hurricane would probably grow into a "Frankenstorm" and give the Northeast US the worst hit in 100 years. The market worried that the storm might strengthen further and hurt supply of the gasoline and distillate market. Yet, this might not be able to support for too long as Wednesday’s report showed that oil inventories remained abundant.

In the UK, GDP surprisingly rose +1.0% q/q in 3Q12, following a -0.4% contraction a quarter ago. This was higher than the market forecast of a modest gain of +0.6% and marked the strongest gain since the financial crisis in 2007. In the Eurozone, ECB reported that lending to the private sector fell -0.8% from the same period a year ago. This was the 5th consecutive decline and the steepest since October 2009. As the economy is expected to remain weak for the rest of the year, lending growth is expected to contract further.

In the US, initial jobless claims fell -23K to 369K in the week ended October 20. The 4 week average, however, climbed +2K to 368K as the data in the previous week was revised by +4K to 392K. Continuous claims slipped -2K in the week ended October 13. Durable goods orders soared +9.9% in September, following a -13.2% contraction a month ago. Excluding transportation, the reading gained +2% in September after slipping -1.6% in the prior month. The US GDP probably gained +1.8% in 3Q12, up from +1.3% gain in the second quarter. Meanwhile, the University of Michigan confidence data might be revised down to 83 in October from the flash reading of 83.1.

Posted courtesy of Oil N'Gold.com

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Friday, October 26, 2012

Seadrill SDRL Reaches 64.23% Ownership in Asia Offshore Drilling

After close of trading on Oslo Børs on 25 October 2012 Seadrill Limited ("Seadrill") has acquired 12,190,858 shares of Asia Offshore Drilling Limited (the "Company", OSE: AOD). The shares were acquired at a price of US$5.0 per share (equals NOK28.71 based on the USD/NOK exchange rate set by the Norwegian Central Bank on 25 October).

Following this acquisition, Seadrill will be the owner of 25,690,958 shares in the Company, corresponding to 64.23% of the total number of outstanding shares in the Company. As a consequence, Seadrill will proceed with the launch of a mandatory cash offer for the remaining shares in the Company. Such mandatory offer will be launched as soon as practicably possible, within the time limits set out in chapter 6 of the Norwegian Securities Trading Act.

RS Platou Markets AS act as financial advisor to Seadrill in connection with the offer.


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Thursday, October 25, 2012

ConocoPhillips Reports Third Quarter Earnings

ConocoPhillips (COP) today reported third quarter 2012 earnings of $1.8 billion, or $1.46 per share, compared with third quarter 2011 earnings of $2.6 billion, or $1.91 per share.

Excluding special items of $26 million, third-quarter 2012 adjusted earnings were $1.8 billion, or $1.44 per share, compared with third quarter 2011 adjusted earnings of $1.9 billion, or $1.40 per share. Special items for the current quarter were primarily related to net gains on asset sales offset by the impact of tax law changes in the United Kingdom and pension settlement expense.

Highlights

* Quarterly production of 1.525 million BOE per day.
* Continued ramp up in Eagle Ford and Bakken.
* Ongoing growth from Canadian oil sands and successful startup of Christina Lake Phase D.
* Major projects and drilling programs on schedule to deliver volume and margin growth.
* Completed turnarounds at major worldwide facilities, as planned.
* Ramping up exploration activity in conventional and unconventional opportunities globally.
* Completed sale of NMNG and dilution of interest in APLNG.

“We performed well in our first full quarter as an independent E&P company,” said Ryan Lance, chairman and chief executive officer. “Our production was on target, our growth projects and drilling programs are on track and our portfolio optimization plans continue to progress. Quarterly production, excluding the impact of dispositions, grew by 40 thousand BOE per day compared to the third quarter of 2011.”

“For the first nine months of 2012, we have generated $2.1 billion in proceeds from asset dispositions and remain on track to complete our $8-$10 billion disposition program by the end of 2013,” Lance added. “We are focused on delivering average annual production growth and margin growth of 3 to 5 percent, improving our financial returns, and offering a sector leading dividend.”

Read the entire earnings report

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EIA: Natural Gas Processing Plant Data Now Available

In the wake of Hurricane Katrina in 2005, which severely disrupted natural gas infrastructure in the Gulf Coast region, EIA established a triennial survey of natural gas processing plants (EIA-757) to be used as a baseline for assessing the effect of extreme weather on natural gas processing infrastructure. This past summer, EIA activated the baseline survey (EIA-757, Schedule A), the results of which are published in EIA's Natural Gas Annual Respondent Query System.

The EIA-757 survey has a baseline portion, Schedule A, to track the country's population of natural gas plants, and an emergency activation portion, Schedule B, to provide the operational status of processing plants in an area affected by a supply disruption, usually a natural disaster such as a hurricane. In August, EIA activated Schedule B to track shut in capacity caused by Hurricane Isaac. EIA used the information collected on EIA-757B to provide daily updates to the Department of Energy's Situation Report and to write a brief retrospective for Today in Energy.

Map displaying size and location of natural gas processing plants in lower 48 states, layered with location of current U.S. shale plays. 

Data from EIA-757 Schedule A show 517 active natural gas processing plants in the Lower 48 states, with a total processing capacity of 65.5 billion cubic feet per day. Not all processing plants run at full capacity all the time. On average, these plants processed about 44.7 billion cubic feet per day, operating at about 68% of capacity. Plants operate at less than capacity for many reasons: transportation constraints, varying input supplied from wells, and regional economics.

Processing plants are midstream facilities that separate natural gas liquids (NGL) from natural gas. Gas processing plants often perform several other functions, as well: dehydration, contaminant removal, and sometimes fractionation (separating an NGL stream into its component products). This survey is not a complete picture of processing capabilities, nor does it represent all processing plants that touch natural gas before it becomes pipeline-quality gas. At the well site, some upstream field processing may be done to remove condensate before gas is sent to a midstream processing plant for NGL extraction. In addition, gas producers may use dehydration units (to remove water) and amine treaters (to remove hydrogen sulfide and carbon dioxide).

Downstream from natural gas processing plants, the combined NGL stream is often broken into separate NGL products (ethane, propane, butane, iso-butane, pentane) by a fractionator. Sometimes straddle plants located on large pipelines will extract small quantities of NGL that remain in the stream even after processing. Similarly, newer, more efficient cryogenic plants may also sit downstream of other processing plants to strip out lighter NGLs that are left in the gas stream for technological or economic reasons. Most storage facilities also have some processing capabilities to dehydrate gas that is withdrawn from storage. When pipeline-quality natural gas is injected into storage, it mingles with other hydrocarbons or water, which must be removed before the gas can be reintroduced into the pipeline grid.

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National Oilwell Varco NOV Announces Third Quarter 2012 Results

National Oilwell Varco (NOV) today reported that for the third quarter ended September 30, 2012 it earned net income of $612 million, or $1.43 per fully diluted share, compared to second quarter ended June 30, 2012 net income of $605 million, or $1.42 per fully diluted share. Earnings per share increased 14 percent compared to the third quarter 2011 earnings of $1.25 per fully diluted share.

Transaction charges for the third quarter of 2012 were $57 million pre tax. Net income for the third quarter of 2012 excluding transaction charges was $650 million, or $1.52 per fully diluted share. This compares to second quarter of 2012 net income of $626 million, or $1.46 per fully diluted share, and third quarter 2011 net income of $536 million or $1.26 per fully diluted share, excluding transaction charges from all periods.

The Company’s revenues for the third quarter of 2012 were $5.3 billion, an increase of 12 percent from the second quarter of 2012 and an increase of 42 percent from the third quarter of 2011. Operating profit for the third quarter of 2012 was $946 million or 17.8 percent of sales, excluding transaction charges. Sequentially, third quarter operating profit increased four percent, resulting in operating profit flow through (change in operating profit divided by the change in revenue) of seven percent, excluding transaction charges. Year over year third quarter operating profit increased 22 percent, resulting in operating profit flow through of 11 percent, excluding transaction charges.

During the third quarter of 2012 the Company’s Rig Technology segment booked $2.29 billion in new orders. Backlog for capital equipment orders for the Company’s Rig Technology segment at September 30, 2012 was $11.66 billion, up three percent from the end of the second quarter of 2012.

Read the entire report

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Wednesday, October 24, 2012

U.S. shale energy production could support 3.5 million jobs by 2035

API President and CEO Jack Gerard said today that the latest report by IHS Global Insight shows development of America’s unconventional oil and natural gas resources could create nearly 2 million new jobs over the next two decades, reawaken American manufacturing, and provide massive revenues to the government.

"The study highlights the extraordinary opportunities we have right here at home to develop our unconventional oil and gas resources and return our economy to a pro-growth engine,” Gerard said. “Polls show Americans’ top priority is job creation and the oil and natural gas industry will be a driver for those new jobs, with nearly three quarters of a million new jobs added over just the next three years.”

The report, America’s New Energy Future: The Unconventional Oil and Gas Revolution and the U.S. Economy, finds that unconventional oil and natural gas production could produce significant growth in capital expenditures and employment, including:

• More than $5.1 trillion in cumulative capital expenditures by 2035.

• Adding 1.2 million new jobs by 2020, and supporting a total of 3.5 million jobs by 2035.

• Almost $62 billion in additional federal, state and local tax receipts in 2012 and more than $111 billion in 2020, with a total of more than $2.5 trillion in cumulative added revenues between 2012 and 2035.

The report was sponsored by API, the Institute for 21st Century Energy, the American Chemistry Council, and the Natural Gas Supply Association.


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Iran's New Oil-Gold Triangle Trade

In recent months there has been a lot of incorrect speculation that because Iran has been shut off from the petrodollar, SWIFT mediated regime, its economy will implode as the country has no access to the all important greenback and can thus not conduct international trade, the driving factor behind the international sanctions that seek to topple the local government as Iran dies an economic death.

And while there have been bouts of substantial inflation, which so far the local government appears to have managed to put a lid on by curbing gray market speculation, Iran continues to more or less operate on its merry ways with international trade most certainly taking place, especially with China, Russia and India as main trading partners.

"How is this possible" those who support the Western led embargo of all Iranian trade will ask? Simple, gold. Because while Iran may have no access to dollars, it has ample access to gold. This in itself is not new, we have reported in the pastthat Iran has imported substantial amounts of gold from Turkey, despite the Turkish government's stern denials.

Today, courtesy of Reuters, we learn precisely what the 21st century equivalent of the Great Silk Road looks like, and just how effective Iran has been as a lab rat in escaping the great petrodollar experiment, from which conventional wisdom tells us there is no escape.

Presenting "Petrogold".....Read the entire article "Iran's New Oil-Gold Triangle Trade "

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Monday, October 22, 2012

Is the Link between Gold and the U.S. Dollar in Question? Here's our Technical Setup

The $1800 per ounce level continues to be a major technical resistance area for gold. After hovering near $1800 recently, gold moved sharply away from that level last week to close at $1735 an ounce.

Despite that, more fund managers and analysts continue to point to a bright long term future for gold prices. John Hathaway of the Tocqueville Gold Fund says gold will reach new highs within a year. He based his forecast, like many others, on the fact that negative real interest rates look likely to persist as Ben Bernanke and the Federal Reserve continue to print money.

Believe it or not, some mainstream analysts are also touting gold’s potential. Merrill Lynch analysts point to the correlation (discussed in a previous article) between the price of gold and the expansion of the Federal Reserve’s balance sheet since the start of QE1 in early 2009.

Based on the current path of the Fed’s balance sheet expansion, Merrill Lynch came up with two longer term targets for the price of gold. They project gold to hit $2,000 an ounce next summer and to hit $2,400 an ounce by the end of 2014.

Another way to look at gold and the Fed is the so called gold coverage ratio. That is the amount of gold on deposit at the Federal Reserve versus the total money supply. According to Guggenheim Partners, the gold coverage ratio is at an all time low of 17%. The historical average is about 40%, meaning that gold would to more than double to reach the average.

Looking at the Fed’s balance sheet is a new and interesting way to look at and forecast gold prices. In the past, the conventional wisdom was that gold was merely an anti-dollar play: U.S. dollar down, gold up and vice versa. But that seems to be changing....

Reuters had some interesting data. The value of the U.S. dollar net short position fell to $6.43 billion for the week ended October 9. This is substantially down from the previous week’s net short position of $16.3 billion. At the same time, the “managed money” net long gold position in gold futures rose to its highest level since August 2011. That was the time when gold hit its record high of $1,920 an ounce.

So much for conventional wisdom. Both currency and gold traders are seeing this long-term relationship between gold and the U.S. dollar breaking down into a “new normal” of direct central bank intervention into financial markets. Gold seems increasingly to be turning into more of a safe haven play than an anti dollar one. It seems that more investors are worried about all fiat currencies that are burdened by huge debt loads.


The Technical Take.....

Below is a daily chart of gold futures. Looking at the price levels and analysis you can see that a bounce or bottom could form at any time now. Price of gold has pulled back in a mini five wave correction touching both our first Fibonacci retracement level of 38% and the 50 day simple moving average. This is the type of pullback that longer term investors like to add to their long gold position. While gold does have the potential to fall all the way down to $1625, in the long run it should continue to rise for the long term investor.

From a trader point of view, it may be worth a stab to get long gold with a very tight stop, but until we see a real panic selling day in gold where volume is high I don’t think the final bottom is in yet.

Spot Gold Bullion Investing


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Saturday, October 20, 2012

Crude Oil, Natural Gas and Gold Weekly Technical Outlook for Saturday Oct. 20th

It's our favorite part of the weekend, let's check in with the staff at Oil N'Gold.com and get their call on crude oil, natural gas and gold.....

Crude oil stayed in range above 87.70 last week and outlook remains unchanged. The fall from 100.42 is still in favor to continue for 61.8% retracement of 77.28 to 100.42 at 86.12 and possibly below. Though, in that case, we'd expect strong support ahead of 77.28 to contain downside. Meanwhile, break of 93.66 will flip bias to the upside for a test on 100.42 resistance.

In the bigger picture, current development suggests that price actions from 114.83 are a triangle consolidation pattern. Fall from 100.42 is likely the fifth and the last leg of such consolidation. Having said that, downside should be contained above 77.28 and bring an upside breakout eventually. Break of 110.55 will strongly suggest that whole rebound from 33.29 has resumed for above 114.83.

In the long term picture, crude oil is in a long term consolidation pattern from 147.27, with first wave completed at 33.2. The corrective structure of the rise from 33.2 indicates that it's second wave of the consolidation pattern. While it could make another high above 114.83, we'd anticipate strong resistance ahead of 147.24 to bring reversal for the third leg of the consolidation pattern.

Nymex Crude Oil Continuous Contract 4 Hour, Daily, Weekly and Monthly Charts

Natural gas edged higher to 3.647 last week but upside momentum is not too convincing for the moment. Nonetheless, near term outlook stays bullish as long as 3.398 support holds. Current rally is still expected to continue to medium term channel resistance next (now at around 3.92). However, break of 3.398 will indicate that a short term top is at least formed and will turn near term outlook bearish for at least a deep pull back.

In the bigger picture, recent developments argued that medium term decline from 6.108 is completed at 1.902 already. It's bit early to confirm but bullish convergence condition in weekly MACD suggests that the down trend from 13.694 (2008 high) is possibly over too. Sustained break of the channel resistance (now at around 3.92) will set the stage for a test on 4.983 key resistance next. Meanwhile, break of 2.575 support will argue that the rebound from 1.902 is over and the medium larger down trend is still in progress for a new low.

In the longer term picture, decisive break of 3.255 resistance will be an important signal of long term bottoming reversal and could at least give a push to 4.983/6.108 resistance zone.

Nymex Natural Gas Continuous Contract 4 Hour, Daily, Weekly and Monthly Charts

Gold's fall from 1798.1 extended further last week and breached 1720 support. The development argues that rebound from 1526.7 has completed at 1798.1 already. Deeper decline would now be seen to 38.2% retracement of 1526.7 to 1798.1 at 1694.4 and below. On the upside above 1755 resistance is needed to signal short term bottoming. Otherwise, outlook will now stay mildly bearish in near term.

In the bigger picture, price actions from 1923.7 high are viewed as a medium term consolidation pattern. There is no indication that such consolidation is finished, and more range trading could be seen. In any case, downside of any falling leg should be contained by 1478.3/1577.4 support zone and bring rebound. Meanwhile, break of 1792.7/1804.4 resistance zone will argue that the long term uptrend is possibly resuming for a new high above 1923.7.

In the long term picture, with 1478.3 support intact, there is no change in the long term bullish outlook in gold. While some more medium term consolidation cannot be ruled out, we'd anticipate an eventual break of 2000 psychological level in the long run

Comex Gold Continuous Contract 4 Hour, Daily, Weekly and Monthly Charts

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Friday, October 19, 2012

Crude Oil, Natural Gas and Gold Week Ending Market Commentary

Crude oil closed lower on Friday as weak earnings spur ideas of weakening energy demand. The low range close sets the stage for a steady to lower opening when Monday's night session begins. Stochastics and the RSI are turning neutral to bearish signaling that sideways to lower prices are possible near term. If November renews the decline off September's high, the 62% retracement level of the June-September rally crossing at 87.19 is the next downside target. Multiple closes above last Wednesday's high crossing at 93.66 are needed to renew this month's rally. First resistance is last Wednesday's high crossing at 93.66. Second resistance is September's high crossing at 100.73. First support is the 62% retracement level of the June-September rally crossing at 87.19. Second support is the 75% retracement level of the June-September rally crossing at 84.29.

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Natural gas closed higher on Friday. The mid-range close sets the stage for a steady to higher opening on Monday. Stochastics and the RSI are diverging but turning neutral to bullish signaling that sideways to higher prices are possible near term. If November renews the rally off August's low, the 50% retracement level of the 2011-2012 decline crossing at 3.965 is the next upside target. Closes below the 20 day moving average crossing at 3.415 would confirm that a short term top has been posted. First resistance is today's high crossing at 3.647. Second resistance is the 50% retracement level of the 2011-2012 decline crossing at 3.965. First support is the 20 day moving average crossing at 3.415. Second support is the reaction low crossing at 3.327.

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Gold closed lower on Friday as it renewed this month's decline. The low range close sets the stage for a steady to lower opening when Friday's night session begins trading. Stochastics and the RSI are neutral to bearish signaling that sideways to lower prices are possible near term. If December extends this month's decline, the 38% retracement level of the May-October rally crossing at 1698.00 is the next downside target. Closes above the 20 day moving average crossing at 1764.70 are needed to confirm that a short term low has been posted. First resistance is the 20 day moving average crossing at 1764.70. Second resistance is this month's high crossing at 1798.10. First support is today's low crossing at 1716.00. Second support is the 38% retracement level of the May-October rally crossing at 1698.00.

Check out Gold Is Not Back In Favor Yet.....

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Thursday, October 18, 2012

Gold Is Not Back In Favor Yet.....

Despite the decline this past week, gold seems to be regaining favor with global investors, as just a week earlier it had been flirting with the $1,800 an ounce mark. Quite a change from the sentiment in early summer when some investors were questioning whether the yellow metal’s decade long bull run was coming to a close.

The rebound in investor sentiment toward gold, of course, coincided with the launching of open ended QE3 (or QE infinity) by the Federal Reserve. Since then gold has “barely paused for breath. It has, as discussed previously, touched all time highs in terms of euros or Swiss francs.

QE3 certainly seemed to worry some investors. These people moving into gold are concerned about things such as competitive devaluations and the debasement of currencies in an attempt to pay back enormous debt loads with a cheaper currency. This road – currency debasement – eventually leads to inflation most believe.

So it is really is not surprising that, according to UBS, investors in exchange traded funds raised their holdings by 158 tons since the beginning of August to a record 2,681 tons of bullion recently.

Many of the world’s best investors are in agreement with the average person putting his or her money into gold. The list of names is impressive: George Soros, John Paulson, Ray Dalio and Bill Gross.

Ray Dalio, founder and chief investment officer of Bridgewater Associates, the world’s largest macro hedge fund, told CNBC viewers recently: “Gold should be part of everybody’s portfolio. We have a situation now when you have too much debt. Too much debt leads to the printing of money to make it easier to service. All of those things mean that some portion [of a portfolio] should be in gold.”

Dalio’s conclusion? “Only gold and real assets would survive.”

All of this positive macro news about gold has managed to influence the gold chart too. According to asset manager Blackrock, “the gold chart has turned decidedly bullish.” Blackrock was speaking about the so called “golden cross”. That occurs when the 50 day moving average moves above the 200 day moving average.

Blackrock noted that the last time gold’s chart looked so good was shortly after the Federal Reserve announced QE1, the first round of money printing. It said that if gold does the same thing it did back then, the price of the precious metal will hit $2,400 an ounce by next summer. Of course, macro factors like Chinese and Indian demand for physical gold will play a major role in whether we reach those lofty levels.

While I am bullish on gold longer term the chart patterns, volume and sentiment for both gold and silver are overwhelmingly bearish looking for the next couple weeks. A sharp pullback is likely to unfold before they take another run at resistance and breakout to new highs.

Gold Bull Market Investing

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Wednesday, October 17, 2012

Kinder Morgan Beats on Earnings, Increases Dividend

Kinder Morgan Energy Partners (KMP) today increased its quarterly cash distribution per common unit to $1.26 ($5.04 annualized) payable on Nov. 14, 2012, to unitholders of record as of Oct. 31, 2012. This represents a 9 percent increase over the third quarter 2011 cash distribution per unit of $1.16 ($4.64 annualized) and is up from $1.23 per unit ($4.92 annualized) for the second quarter of 2012. KMP has increased the distribution 45 times since current management took over in February 1997.

Chairman and CEO Richard D. Kinder said, “KMP had a strong third quarter with all five of our business segments reporting better results than in the third quarter of 2011. In total, KMP produced $1.14 billion in segment earnings before DD&A and certain items, a 21 percent increase over $0.94 billion for the same period a year ago. Third quarter highlights included contributions from the dropdowns of 100 percent of Tennessee Gas Pipeline (TGP) and 50 percent of El Paso Natural Gas (EPNG), record export coal volumes in our Terminals business, strong oil production at SACROC in our CO2 segment and increased natural gas demand for electric power generation on the TGP system. Looking ahead, we see significant growth opportunities across all of our business segments, and we remain very excited about the additional prospects that we expect KMP to realize from Kinder Morgan, Inc.’s acquisition of El Paso Corporation, which closed in the second quarter. With our large footprint of assets in North America, KMP is well positioned for future growth.”

KMP reported third quarter distributable cash flow before certain items of $455 million, up 15 percent from $394 million for the comparable period in 2011. Distributable cash flow per unit before certain items was $1.28 compared to $1.19 for the third quarter last year. Third quarter net income before certain items was $574 million compared to $451 million for the same period in 2011. Including certain items, net income was $383 million compared to $216 million for the third quarter last year. Certain items for the third quarter totaled a net loss of $191 million versus a net loss of $235 million for the same period last year.

For the first nine months of the year, distributable cash flow before certain items was $1.29 billion, up 17 percent from $1.10 billion for the comparable period in 2011. Distributable cash flow per unit before certain items was $3.72 compared to $3.40 for the same period last year. Net income before certain items was $1.58 billion compared to $1.27 billion for the first three quarters of 2011. Including certain items, net income was $737 million versus $789 million for the same period last year.

Certain items for the first nine months of the year totaled a net loss of $838 million versus a net loss of $479 million for the comparable period in 2011. The loss, due to certain items for the first three quarters, was primarily attributable to the re-measurement of discontinued operations to fair value related to the KMP assets to be divested in order to obtain Federal Trade Commission approval for Kinder Morgan, Inc.’s acquisition of El Paso.

Read the entire KMP report

Kinder Morgan, Inc. (NYSE: KMI) today reported third quarter cash available to pay dividends of $362 million, up 93 percent from $188 million for the comparable 2011 period. Through the first nine months, KMI reported cash available to pay dividends of $972 million compared to $623 million for the same period in 2011. The company now expects to generate cash available to pay dividends of more than $1.325 billion for the year, significantly ahead of its published annual budget. The increase is attributable to the El Paso Corporation acquisition which closed in late May.

Check out the entire KMI report

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Halliburton Announces 3rd Quarter Earnings

Halliburton (HAL) announced today that income from continuing operations for the third quarter of 2012 was $625 million, or $0.67 per diluted share, excluding a $30 million after tax ($0.03 per diluted share) acquisition related charge and a $13 million after tax ($0.01 per diluted share) gain from the settlement of a patent infringement case.

Reported income from continuing operations for the third quarter of 2012 was $608 million, or $0.65 per diluted share. This compares to income from continuing operations for the second quarter of 2012 of $745 million, or $0.80 per diluted share.

Halliburton’s consolidated revenue in the third quarter of 2012 was $7.1 billion, compared to $7.2 billion in the second quarter of 2012. Consolidated operating income was $954 million in the third quarter of 2012, compared to $1.2 billion in the second quarter of 2012. Lower activity and higher costs in the United States land market drove these declines.

“I am pleased with the strengthening of our market position in key international geographies and in product lines where we envision strong growth in the coming years,” commented Dave Lesar, chairman, president and chief executive officer.

“We believe our international strategy is playing out as planned, as evidenced by our third quarter record revenue for both the Latin America and the Middle East/Asia regions. From a global perspective, our Drilling & Evaluation division posted record revenue for the quarter. We also achieved third quarter record revenue in four of our product service lines... Boots & Coots, Wireline and Perforating, Consulting and Project Management, and Baroid, which also had a record quarter for operating income.

Read the entire earnings report


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ExxonMobil Canada Acquires Celtic Exploration Including Liquids Rich Montney Shale Acreage

ExxonMobil Canada today announced an agreement with Celtic Exploration under which an ExxonMobil Canada affiliate will acquire Celtic.

Under the terms of the agreement, ExxonMobil Canada will acquire 545,000 net acres in the liquids rich Montney shale, 104,000 net acres in the Duvernay shale and additional acreage in other areas of Alberta.

Current production of the acreage to be acquired is 72 million cubic feet per day of natural gas and 4,000 barrels per day of crude, condensate and natural gas liquids. The assets were estimated by Calgary based Celtic Exploration at December 31, 2011 to include an estimated 128 million oil equivalent barrels of proved plus probable reserves, of which 24 percent are crude, condensate and natural gas liquids and 76 percent natural gas.

Approximately 60 employees at Celtic Exploration will be given the opportunity to transition to ExxonMobil employment.

Shareholders of Celtic Exploration will receive C$24.50 per share and half a share of a newly established company which will hold assets not included in the agreement with ExxonMobil Canada. These assets include acreage in the Inga area in British Columbia, the Grande Cache area in Alberta and interests in oil and gas properties located in Karr, Alberta.

The agreement is subject to approval by Celtic Exploration’s shareholders and Canadian regulatory authorities.

“This acquisition will add significant liquids-rich resources to our existing North American unconventional portfolio,” said Andrew Barry, president of ExxonMobil Canada. “Our financial and technical strength will enable us to maximize resource value by leveraging the experience of ExxonMobil subsidiary XTO Energy, a leading U.S. oil and natural gas producer which has expertise in developing tight gas, shale oil and gas and coal bed methane.”

ExxonMobil Canada, a subsidiary of Exxon Mobil Corporation (NYSE:XOM), has a long history in Canada that dates back to the 1940s. The company is a leader in the Atlantic Canada offshore, where it operates the Sable project in Nova Scotia, is lead owner of the Hibernia project in Newfoundland and Labrador, where it is developing the Hebron project. ExxonMobil Canada has additional assets in Western and Northern Canada.

ExxonMobil’s Canadian affiliate, Imperial Oil Limited, is not a party to the transaction, but may elect to participate at a later date through its existing agreement with ExxonMobil Canada that provides for up to equal participation in new Canadian upstream opportunities. Imperial Oil Limited has advised that it is currently evaluating this opportunity.

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Tuesday, October 16, 2012

Stephen Schork: Consumer Inelasticity at the Pump Wanes

Equity markets in the U.S. got a boost yesterday morning after the U.S. Commerce Department showed a large 1.1% jump in advanced retail sales for the month of September. A survey conducted by Bloomberg showed a consensus forecast 0.8% rise.

However, similar to what we saw back with the July report, it seems that the Commerce Department factored in a heavy (843 bp) upward bias in its headline figure for September. Had the Commerce not adjusted last month’s figure, then sales would have come in close to market expectations of 0.8% growth; which btw, is a healthy number.

The adjustment amounted to a $22.2 billion boost to September retail sales to $412.9 billion.

The upward dollar adjustment was 1.8× greater than last year’s figure and 1.5× greater than the 2006-2010 average. Moreover, it was the largest, by far, such adjustment of past 20 Septembers.

Retail sales data is adjusted by Commerce to account for seasonal, business day and holiday differences. To this effect, this year’s Labor Day holiday fell on the first business day of the month, i.e. September 03rd.

Given when this year’s holiday fell, there were only 19 business days this September; as opposed to 21 business days for September 2011.

As such, the Commerce Department’s statistical hocus pocus is designed (in theory) to adjust for the loss of 2 business days this September.

Bottom line, like all models, forecasts are only as good as the assumptions programed into them. Therefore, we will take the adjusted 1.1% growth in September sales as a positive for the economy. After all, the stock market loved this report… and those guys are never wrong.

Yet, just keep in mind that Commerce’s seasonal factor will subtract 423 bps from October retail sales… and, that is even before we can talk about the 5.4% spiked in California’s retail gasoline prices this month.

While we are on the subject of retail sales and gasoline, according to yesterday’s report, gasoline station receipts (unadjusted) tumbled in September as consumers turned a blind eye to the cost of whatever Apple is selling, but balked as retail gasoline climbed above $3.80 on the national average.

Receipts fell to $46.56 billion, down from $49.49 billion in August. In comparative terms, retail gasoline averaged around $3.722 per gallon in August and then climbed to $3.849 in September. In other words, a $0.127 per gallon rise in price generated a $2.92 billion drop in receipts.

If that seems counterintuitive to you, don’t fret, you are correct.

September’s receipts decoupled from the polynomial regression for this timestep, i.e. receipts were out of line with historical norms given the cost per gallon.

How much longer can NYMEX gasoline (RBOB) futures maintain these lofty levels if motorists are unwilling (or unable) to pony up when gas at the pump moves above $3.60?

Thus, we are left to surmise that in spite of strong consumer spending elsewhere in the economy, consumers pulled back at the pump.

As illustrated in today’s issue of The Schork Report we see that this event has clearly taken hold. As the real cost of gasoline rises above $3.60 per gallon, consumers respond by driving fewer miles. Therefore, fewer miles and $115/b Brent crude oil means fewer dollars on the bottom line for refiners and marketers.

This story has been provided compliments of CME Group. To request today’s FULL research note, email Subscriptions@SchorkReport.com or register for a complimentary trial here, placing CME in the source code field.


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Murphy Oil Making Big Dividend and Buy Back News

Murphy Oil Corporation (ticker MUR) is up +7.3% premarket after announcing it will spin off its U.S. downstream business into an independent company.

MUR also authorizes a $2.50 per share special dividend and $1 billion share buyback program, and says it’s still working to divest its U.K. downstream operations and continuing to review options with respect to "selected assets."

Murphy Oil's move to spin off its U.S. fuel making and distribution business into a new company could unlock up $5 per share in trapped enterprise value, Simmons analysts say, and "could be a sign for more aggressive moves to continue to improve the valuation in shares".

Here is today's video on the stock market and commodities talking about a possible 6-12 week pullback in stocks

Monday, October 15, 2012

Natural Gas Prices Extend Rally Amid Cooler Weather

Benchmark U.S. natural gas prices rose for the third week in a row, extending a rally to reach the highest levels since December as cooler weather boosted heating demand, the Energy Information Administration said.

Henry Hub gas as of October 10 was $3.26 per million British thermal units, up 5 cents from a week earlier. In midday NYMEX futures trading October 12, November gas fell 0.7 cent to $3.597, up 5.9%, from the end of last week. Futures earlier hit $3.638, the highest price for a nearby contract since early December.

During the week ended October 10, overall U.S. gas demand rose 6% from the previous week, led by a surge of 44% in residential and commercial use.

Working natural gas in underground storage increased to 3.725 trillion cubic feet as of October 5, an implied net injection of 72 billion cubic feet from the previous week and 6.8% over year ago levels.

Read the full report

Seadrill Partners SDLP Announces Launch of Initial Public Offering

Seadrill Partners LLC ("Seadrill Partners"), a wholly owned subsidiary of Seadrill Limited (NYSE: SDRL) today announced that it has commenced an initial public offering of 8,750,000 common units, representing limited liability company interests, pursuant to a registration statement on Form F-1 (including a prospectus) previously filed with the U.S. Securities and Exchange Commission.

Seadrill Partners intends to grant the underwriters a 30 day over allotment option to purchase up to 1,312,500 additional common units. The common units being offered to the public have been approved for listing on the New York Stock Exchange under the symbol "SDLP," subject to official notice of issuance.

Based on the number of common units to be offered, Seadrill Limited will own a 78.8% limited liability company interest in Seadrill Partners following completion of the Offering (or a 75.7% limited liability company interest, if the underwriters exercise in full their option to purchase additional common units.)

Seadrill Partners was formed by Seadrill Limited to own, operate and acquire offshore drilling rigs under long term contracts. Seadrill Partners' initial fleet will consist of two semi-submersible rigs (West Capricorn and West Aquarius), one drillship (West Capella) and one tender rig (West Vencedor).

The offering of the common units will be made only by means of a prospectus. A written prospectus meeting the requirements of Section 10 of the Securities Act of 1933, when available, may be obtained from the offices of.....Here is a complete list.

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Sunday, October 14, 2012

Natural Gas Sentiment Continuing to Change

The US natural gas market is sounding and acting like a market that has no intention of collapsing as it did last winter. More and more signs are pointing to a market that is currently looking higher and not lower. The injection season has been a huge surprise this year with the majority of the weekly injections under performing both last year and the five year average. The surplus of natural gas in inventory peaked versus the same period last year and the five year average in at the end of March when there was about 890 BCF more in inventory than the previous year and about 935 BCF more than the five year average. Since peaking the surplus has steadily declined throughout the inventory building season.

Basis the latest inventory report the surplus declined by 651 BCF or 73% since peaking in the last week of March and 665 BCF or 71% versus the five year average for the same period. This has been a significant turnaround and one that not many analysts were predicting back in the first quarter of 2012. The combination of an above average level of coal to natural gas switching due to very low nat gas prices at the end of the winter, a very early start to a very hot summer period resulting in an increase in nat gas for cooling related power generation demand and a slow but steady reduction in the number drilling rigs deployed to the nat gas sector. In fact rigs deployed to nat gas are now at a 13 year low.

Although natural gas inventories are going to end the season at a new record high the level will be less than 2% above last year. With a more normal winter forecast coupled with supply not soaring it is likely that the price of nat gas will settle into a much higher trading range than last winter and spring. I would expect the futures market to trade in a wide range of about $3 to $3.20/mmbtu on the low side to even as high as $4 to $4.25/mmbtu on the high side if the winter weather truly materializes as forecast.

I am expecting a wide trading range as the winter forecast is uneven with mild temperatures forecast for the first part of the winter heating season (October through December) and much colder and snowy conditions predicted for the second half of the season (January through March). Certainly the forecast can change significantly as time moves forward and any repeat of last winter will change everything as prices will plummet once again as another surplus would build in inventory.....Read the entire Dominick Chirichella CME Group article.

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Weekly Crude Oil, Natural Gas and Gold Technical Outlook for Sunday October 14th

Time for our weekly visit with the staff at Oil N' Gold.com to get their call on crude oil, natural gas and gold......

Despite a brief breach, crude oil failed to stay above 93.33 minor resistance and thus, near term outlook remains unchanged. The fall from 100.42 is still in favor to continue for 61.8% retracement of 77.28 to 100.42 at 86.12 and possibly below. Though, in that case, we'd expect strong support ahead of 77.28 to contain downside. Meanwhile, break of 93.33 will flip bias to the upside for a test on 100.42 resistance.

In the bigger picture, current development suggests that price actions from 114.83 are a triangle consolidation pattern. Fall from 100.42 is likely the fifth and the last leg of such consolidation. Having said that, downside should be contained above 77.28 and bring an upside breakout eventually. Break of 110.55 will strongly suggest that whole rebound from 33.29 has resumed for above 114.83.

In the long term picture, crude oil is in a long term consolidation pattern from 147.27, with first wave completed at 33.2. The corrective structure of the rise from 33.2 indicates that it's second wave of the consolidation pattern. While it could make another high above 114.83, we'd anticipate strong resistance ahead of 147.24 to bring reversal for the third leg of the consolidation pattern.

Nymex Crude Oil Continuous Contract 4 Hour, Daily, Weekly and Monthly Charts

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Natural gas' rally continued last week and reached as high as 3.638 so far. Near term outlook stay bullish as long as 3.327 support holds. Current rise from 1.902 is expected to continue towards medium term channel resistance next (now at around 3.94).

In the bigger picture, the strong break of 55 weeks EMA, as well as the break of 3.255 support turned resistance indicates that medium term decline from 6.108 is completed at 1.902 already. It's bit early to confirm but bullish convergence condition in weekly MACD suggests that the down trend from 13.694 (2008 high) is possibly over too. Sustained break of the channel resistance (now at around 3.94) will set the stage for a test on 4.983 key resistance next. Meanwhile, break of 2.575 support will argue that the rebound from 1.902 is over and the medium larger down trend is still in progress for a new low.

In the longer term picture, decisive break of 3.255 resistance will be an important signal of long term bottoming reversal and could at least give a push to 4.983/6.108 resistance zone.

Nymex Natural Gas Continuous Contract 4 Hour, Daily, Weekly and Monthly Charts

Gold's correction from 1798.1 continued last week. Further decline could be seen. But as long as 1720 minor support holds, current rise is still expected to continue. Decisive break of 1792.7/1804.4 resistance zone will have larger bullish implication and would pave the way to 1923.7 historical high. Though, break of 1720 will indicate near term reversal and will turn outlook bearish for 1674/1 support first.

In the bigger picture, price actions from 1923.7 high are viewed as a medium term consolidation pattern. There is no indication that such consolidation is finished, and more range trading could be seen. In any case, downside of any falling leg should be contained by 1478.3/1577.4 support zone and bring rebound. Meanwhile, break of 1792.7/1804.4 resistance zone will argue that the long term uptrend is possibly resuming for a new high above 1923.7.

In the long term picture, with 1478.3 support intact, there is no change in the long term bullish outlook in gold. While some more medium term consolidation cannot be ruled out, we'd anticipate an eventual break of 2000 psychological level in the long run.

Comex Gold Continuous Contract 4 Hour, Daily, Weekly and Monthly Charts

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Saturday, October 13, 2012

Dodd-Frank Poses Unique Challenges for Energy Firms

New Dodd-Frank financial regulation poses unique challenges for energy companies, forcing them to establish proper compliance and regulatory reporting mechanisms and making sure they have the right people to carry out these tasks, industry consultant Mayra Rodriguez Valladares said in a report.

Energy and other commodity businesses recently caught a break when a U.S. District Court judge ruled against a Dodd-Frank provision on trading position limits. But because Dodd-Frank focuses substantially on regulating over the counter derivatives and making them more transparent, companies using energy derivatives will be impacted just as much, if not more so, than banks in some ways, she said.

"For energy companies, the biggest challenge will be juggling how to live in an environment of uncertainty and possible increases in costs," Valladares wrote in the first of a series of reports on Dodd-Frank's potential impact on various sectors of the business world.

Valladares, a CME Group featured contributor, is managing principal with MRV Associates, a New York based capital markets and financial regulatory consulting firm.

Read the Full Report


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Friday, October 12, 2012

New Application of Existing Techniques in Old Fields Helps Russia Increase Oil Production

Russia was the world's largest producer of crude oil in 2011. As Russia's use of multistage hydraulic fracturing and horizontal drilling has increased, preliminary Russian crude oil production figures indicate that production has risen in 2012.

West Siberia, Russia's main producing region, accounts for around 6.5 million barrels per day (bbl/d) of liquids production, nearly two thirds of Russia's total production. While this region is mature, new applications of existing technologies have boosted recovery rates at oil fields that had stopped growing or begun declining.

TNK-BP has announced that it is the first company in Russia to apply a unique improved multistage fracturing technology to develop reserves in mature oilfields in West Siberia. A pilot at the Samotlor oil field has tested a six-stage hydraulic fracturing technology, which resulted in reduced well completion times and increased reservoir productivity. TNK-BP now plans to expand the pilot project to 25 more wells in the Samotlor field by the end of 2012, and, starting in 2013, the company plans to use the technology to fracture about 50 horizontal wells each year across its subsidiaries in Western Siberia.

 Graph of Russian crude oil production from 1992 through 2011, as explained in article text, with embedded image of Russian oil fields.

Production from Samotlor, which accounts for about one-quarter of TNK-BP's output, fell 7% in 2011. The drop was low, however, compared to previous years, indicating that the field's future annual declines may be less severe. Continued use of multistage hydraulic fracturing may result in a decline rate of only 1% by 2016.

In addition to TNK-BP, LUKoil is fighting declining crude oil production in the region using multistage hydraulic fracturing at its Tevlinsko-Russkinskoye, Uryevskoye, Vat-Yeganskoye, and Pokachevskoye fields in Western Siberia. According to LUKoil, use of this technique led to a halt in field declines, although the use of the technology may be limited because of its high cost.

LUKoil and TNK-BP were the second- and third-largest producers of oil in Russia in 2010 at approximately 1.8 and 1.4 million bbl/d, respectively.

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Crude Kickbacks Between China and Venezuela

Venezuelan President Hugo Chavez has been in power for 14 years. On Sunday he earned the right to remain there for another six (though he’s battling cancer).

Chavez is often characterized as a dictator, but the truth is, Venezuela’s election process has been lauded by international observers. So if not through brute force, how does a president, whose country has the world’s highest rate of inflation (28%) and a soaring crime rate, win re-election?

Answer: He buys it....Read the entire EconMatters article


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Musings: Is America Knocking On The Door Of Energy Independence?

A phrase introduced into the modern lexicon by President Richard Nixon in the early 1970s was "energy independence". Ever since then, as the nation's domestic oil production declined and our natural gas output stagnated resulting in ever increasing imports of foreign oil and Canadian gas, national politicians campaigned on plans to make America energy independent.

Nearly 40 years after President Nixon uttered the phrase, the shale revolution has transformed America's petroleum industry into an engine for hydrocarbon production growth. With that additional oil and gas production, America's dependence on petroleum imports has declined. Increasingly, not only are the politicians talking about energy independence, but energy industry executives along with energy economists and consultants are also openly talking about the day when the U.S. meets all its power needs from domestic resources.

In late September, the Energy Information Administration (EIA) released data showing weekly domestic crude oil production had reached the highest level since January 1997, some 15 years ago. Reports are that despite the slowdown in drilling in the Bakken formation in North Dakota and Montana, production there should continue to rise during the second half of 2012.

Two charts demonstrate the significance of the increase in domestic production. The first chart shows the weekly estimate of domestic crude oil production since January 1990 with a red line showing how the September 21 data compares with production in early January 1997.......Let's go to the charts.
 

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Thursday, October 11, 2012

EIA Natural gas Weekly Update for Week Ending Wednesday 10-10-2012

Natural gas prices rise in Midwest, Rocky Mountains, and Pacific Northwest, fall in California. The Henry Hub spot price rose from $3.21 per MMBtu last Wednesday to $3.26 yesterday, an increase of 5 cents per MMBtu, or 1.5 percent.

Spot prices at the Chicago Citygate (Midwest), Kern River (Rocky Mountains), and Northwest Sumas (Pacific Northwest) trading points increased for the week ending yesterday by 12 cents, 17 cents, and 20 cents per MMBtu, respectively. These increases were a less pronounced continuation of those seen last week at these trading points, likely due to cooling temperatures.

* Natural gas price changes at key trading points were mixed for the report week (Wednesday to Wednesday). The Henry Hub spot price closed at $3.26 per million British thermal units (MMBtu) yesterday, up 5 cents per MMBtu for the week. Spot prices rose in the Midwest, Rocky Mountains, and Pacific Northwest, while falling in Southern California and remaining unchanged in the Northeast.

* The November 2012 New York Mercantile Exchange (NYMEX) edged upwards by 8 cents per MMBtu, from $3.395 per MMBtu last Wednesday to $3.475 per MMBtu yesterday.

* Working natural gas in storage rose last week to 3,725 billion cubic feet (Bcf) as of Friday, October 5, according to EIA's Weekly Natural Gas Storage Report (WNGSR). An implied storage build of 72 Bcf for the week moved storage levels 236 Bcf above year ago levels.

* The Baker Hughes Incorporated natural gas rotary rig count increased by 2 to 437 active units on the week ending October 5. The oil directed rig count fell by 12 to 1,398 units.

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Check out Bill Gross Says Gold Will Thrive in ‘Ring of Fire’

Wednesday, October 10, 2012

Bill Gross Says Gold Will Thrive in ‘Ring of Fire’

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Bill Gross is one of the most recognizable names in the investment world. He is the founder and co chief investment officer at bond fund giant PIMCO. His long term track record regarding bonds is among the best and he still runs the world’s biggest bond fund, the PIMCO Total Return Fund.

Gross is also known for speaking quite bluntly about the United States’ growing debt problem. His latest monthly market commentary came with a warning for the U.S. and investors alike. Gross stated that a number of recent studies have concluded that “The U.S. balance sheet, its deficit and its ‘fiscal gap’ is in flames and that its fire department is apparently asleep at the station house.”

The recent studies Gross pointed to came from the Congressional Budget Office, the International Monetary Fund and the Bank of International Settlements. The studies calculated that the United States needs to cut spending or raise taxes by 11% of GDP over the next 5-10 years. This translates to $1.6 trillion per year. That compares to the country’s 8% of GDP deficit in 2011. Those numbers put the U.S. in the ‘ring of fire’ with other countries with similar fiscal gap sizes. These countries include Greece, Spain, Japan, France and the U.K.

Gross warned that the U.S. debt problems have put the country in this “ring of fire” that will burn most investors. The only investors who will not get “burned”? He says the lucky few will be those that are protected by gold and other real assets, protected from a severe U.S. dollar depreciation caused by the Federal Reserve’s money printing.

In a white paper titled “GOLD – The Simple Facts” posted on PIMCO’s website, PIMCO analysts Nicholas J. Johnson and Mihir P. Worah also said some interesting things. Here is an excerpt, “Our bottom line: given current valuations and central bank policies, we see gold as a compelling inflation hedge and store of value that is potentially superior to fiat currencies.” They pointed out the positive supply/demand characteristics of gold as a big plus in their scenario. The PIMCO analysts went on to say, “We believe investors should consider allocating gold and other precious metals to a diversified investment portfolio.”

That is quite a statement coming from a “mainstream” investment firm. Wall Street’s usual reaction to gold is that it is a barbarous relic whose only use is in jewelry and that no sane investor should put any money into it, even paper gold instruments such as gold ETFs like the SPDR Gold Shares (NYSE: GLD) and others.

After Bill Gross’ bullish words, gold prices were trading a 7 month high on Thursday before falling Friday to finish the week at about $1776.00 an ounce.

Gold Investing Newsletter

From a technical analysis point of view gold, silver and gold miners have been holding value at key resistance levels. While we could see a 3-5% pullback before they breakout and start the next rally overall the outlook for precious metals remains very strong and I put a $2400 per ounce on gold for 2013.

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Chris Vermeulen

Tuesday, October 9, 2012

The New Normal for U.S. Geopolitics

Posted courtesy of our friends at EconMatters.....

Over the past weekend, rumors began to emerge that the Syrian opposition would allow elements of the al Assad regime to remain in Syria and participate in the new government. Rumors have become Syria's prime export, and as such they should not be taken too seriously. Nevertheless, what is happening in Syria is significant for a new foreign doctrine emerging in the United States, a doctrine in which the United States does not take primary responsibility for events, but which allows regional crises to play out until a new regional balance is reached. Whether a good or bad policy, and that is partly what the U.S. presidential race is about, it is real, and it flows from lessons learned.

Threats against the United States are many and complex, but Washington's main priority is ensuring that none of those threats challenge its fundamental interests. Somewhat simplistically, this boils down to mitigating threats against U.S. control of the seas by preventing the emergence of a Eurasian power able to marshal resources toward that end. It also includes preventing the development of a substantial intercontinental nuclear capability that could threaten the United States if a country is undeterred by U.S. military power for whatever reason. There are obviously other interests, but certainly these interests are fundamental.

Therefore, U.S. interest in what is happening in the Western Pacific is understandable.....Read the entire article.

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EIA: Territorial Disputes Hamper Exploration and Production of Resources in the East China Sea

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The East China Sea may have abundant hydrocarbon resources, especially natural gas, although the region is underexplored. China and Japan, the two largest energy consumers in Asia, are both interested in using natural gas from the East China Sea to meet rising domestic demand. However, unresolved territorial disputes make exploration and development of these resources difficult.

China is the world's largest energy consumer and the second largest importer of oil after the United States. Because of its growing reliance on natural gas in recent years, China is now a net importer of natural gas. EIA forecasts continued growth in Chinese oil and natural gas consumption, necessitating new supplies to meet demand.

Japan is the world's third largest net importer of crude oil, and the world's largest importer of liquefied natural gas. Japan is expected to continue to rely heavily on imports to meet future consumption needs.

Map of the disputed areas and oil and natural gas resources in the East China Sea


Hydrocarbon reserves in the East China Sea are difficult to estimate, but EIA estimates the East China Sea contains 60-100 million barrels of oil in proven and probable reserves, and 1-2 trillion cubic feet (Tcf) of proven and probable natural gas reserves. Estimates of undiscovered resources, which do not take into account economic and technological factors relevant to bringing them into production, show significant resource potential. Chinese sources estimate as much as 70-160 billion barrels of oil and 250 Tcf of natural gas in undiscovered, technically recoverable resources.

Chinese authorities seek to increase offshore natural gas production to supply Shanghai and nearby cities. However, the East China Sea is not expected to become a significant supplier of oil for a number of years, even after resolution of the territorial disputes.

Graph of undiscovered recoverable natural gas resources by location, 2012, as explained in the article text


Graph of undiscovered recoverable crude oil resources by location, 2012, as explained in the article text


China and Japan have two separate territorial disputes in the East China Sea: where to demarcate the sea boundary between each country and how to assign sovereignty over a group of islands called Diaoyu by the Chinese and Senkaku by the Japanese. The two countries have held bilateral talks, as well as considered joint development of resources in the Sea, with no agreement thus far.

Further exploration and development in this region may be hampered until these disputes are resolved. For more information on the East China Sea, read EIA's regional analysis brief.

Thursday, October 4, 2012

70 Second Market Outlook – Metals, Dollar, Bonds, Stocks, Energy

Over the past year we have had some really interesting things unfold in the market. Investing or even swing trading has been much more difficult because of all the wild economic data and daily headline news from all over the globe causing strong surges or sell offs almost every week.

For a while there you could not hold a position for more than a week without some type of news event moving the market enough to either push you deep in the money or get stopped out for a loss. This has unfortunately caused a lot of individuals to give up on trading which is not a good sign for the financial market as a whole.

The key to navigating stocks which everyone thinks are overbought is to trade small position sizes and focus on the shorter time frames like the 4 hour charts. This chart is my secret weapon and giving you both large price swings which daily chart traders focus on while also showing clear intraday patterns to spot reversals or continuation patterns with precise entry/exit points.

While I could ramble on about why the stock market is primed for major long term growth from this point forward I will keep things short and simple with some 4 hour and daily charts for you to see what I see and what I am thinking should unfold moving forward.

Keep in mind, the most accurate trading opportunities that happen week after week are the quick shifts in sentiment which only last 2-5 days at most which is what most of my charts below are focusing on…..

Dollar Index – 4 Hour Chart

This chart shows a mini Head & Shoulders reversal pattern and likely target over the next five sessions. The dollar index has been driving the market for the past couple years so a lower dollar means higher stock and commodity prices.

Dollar Index Trading

Bond Futures – 4 Hour Chart

Money has been flowing into bonds for the past couple weeks with most traders and investors expecting a strong correction in stocks. As you can see the price of bonds hit resistance this week and as of Thursday has now started selling off. Money flowing out of this “Risk Off” asset means money will move to the “Risk On” investments like stocks and commodities.

Bond Futures Trading

Gold Futures – Daily Chart

Gold is stuck in both categories in my opinion. It is a “Risk Off” safe haven when people are scared of falling stock prices, and it is also a “Risk On” speculative investment when people are feeling good about the market. Gold has been trading at key resistance for a couple weeks and looks as though it’s starting its next rally.

Gold Futures Trading

Silver Futures – Daily Chart

Silver is in the same boat as gold though it carries much more volatility than gold. Expect 2-4% swings regularly and sloppy chart patterns in this metal.

Silver Futures Trading

SP500 Futures – Daily Chart

As much as everyone hates to buy stocks up at these lofty prices I hate to say it but I think they are going to keep going up and they could do this for a long time yet. If the dollar index continues to break down then I expect the SP500 to rally another 3% from here (1500) in the next 1-2 weeks.

SP500 Futures Trading

Crude Oil Futures – 4 Hour Chart

Crude oil has not had much attention from me in the past few months. While it has had big price action many of those big days took place on news causing an instant price movement making this extra dangerous to trade. I continue to watch rather than get attached to it.

Crude Oil Futures Trading

Natural Gas Futures – Daily Chart

Natural gas has been a great performer for us in the past 6 months as all the short positions slowly get covered. I just closed out my natural gas ETF trade this week with a 31.9% gain and plan on getting back in once the chart provides another low risk setup.

Natural Gas Futures Trading

Trading Conclusion:

In short, I feel the dollar index along with bonds will correct over the next few weeks. That will trigger buying in stocks and commodities. Keep in mind natural gas dances to its own drum beat. The dollar does not have much affect on its price and most times natural gas is doing the opposite of the broad market.

Get My Pre-Market Trading Analysis Video 
and Intraday Chart Analysis EVERY DAY at www. The Gold & Crude Oil Guy.com

Chris Vermeulen


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