Showing posts with label ExxonMobil. Show all posts
Showing posts with label ExxonMobil. Show all posts

Saturday, October 14, 2023

Is Exxon Mobil Gearing up to Become the #1 Energy Stock?

The American shale industry is a testament to the inventive spirit of grassroots capitalist enterprise. This sector was revolutionized by innovative frackers, who introduced groundbreaking methods of horizontal drilling and oil extraction from rock formations.

However, not all major oil companies rushed to capitalize on the shale boom with the same zeal. Global oil giant Exxon Mobil Corporation (XOM) cautiously approached the rich shale territory, such as the Permian basin, due to the reckless expansionism of the wildcatters, consequently burning billions of investors' funds....Continue Reading Here.

Wednesday, June 14, 2017

The Last Time We Saw This, Investors Doubled Their Money in Six Months

By Justin Spittler

Gold couldn’t catch a bid in December 2015. It was down more than 30%, and trading at the lowest price in nearly six years. Gold stocks, which are leveraged to the price of gold, were doing even worse. The average gold stock was 80% off its highs. Most investors wanted nothing to do with gold. But not Doug Casey. Doug knew gold would rebound. It was only a matter of time. He even told Kitco, one of the world’s biggest gold and silver retailers, on December 18, 2015, that he was buying gold hand over fist:
My opinion is if it’s not the bottom, it’s close enough to the bottom. So, I have to be an aggressive buyer of both gold and silver at this point.
Doug’s timing was nearly perfect.…
The day before, gold bottomed. It went on to gain 30% over the next six months. The average gold stock more than doubled in value over the same period.


I’m telling this story because an opportunity just like this is shaping up before our eyes. Only this time, it’s in the energy market.

Energy stocks have been beaten to a pulp.…
You can see what I mean below. It shows how the Energy Select Sector SPDR ETF (XLE) has done since the start of the year. This fund invests in 36 major U.S. energy companies, including Exxon Mobil and Chevron. You can see that XLE is down 13% this year. That makes energy stocks the worst-performing sector in the S&P 500.



Energy stocks are now off to “one of the worst beginnings to the year ever,” according to Morgan Stanley. As if that weren’t enough to scare away most investors, look at the ugly chart below. It compares the performance of XLE with the SPDR S&P 500 ETF (SPY), which tracks the S&P 500. When the line is rising, energy stocks are doing better than the broad market. When it’s falling, energy stocks are underperforming the S&P 500.



Energy stocks have been lagging the broad market for nearly a decade.…
As a result, energy stocks now make up just 5.9% of the S&P 500. That’s half of what the sector’s weighting was in 2011. Not only that, the 36 energy stocks that make up XLE are now worth less than the combined value of Apple and Alphabet, the parent company of Google.

Situations like this don’t last forever.…
Eventually, the pendulum swings the other way. The trick is knowing when that will happen. That’s obviously easier said than done. Plus, you have to understand that markets rarely change direction on a dime. Instead, they usually go through a bottoming process that can take weeks or longer. And it looks like energy stocks may have begun that process.

Energy stocks took off last week.…
XLE jumped 2.5% on Friday. That was the biggest one-day jump in energy stocks since last November. This week, XLE is up another 1.4%. Now, it would be easy to dismiss this as “noise.” But if energy stocks keep rallying, XLE could “break out.” The chart below shows the performance of XLE over the last 12 months. You can see that it’s been in a downtrend since late 2016.



You can see that XLE hasn’t broken out of its downtrend yet. But it could do that sooner than most investors think.

Energy companies are starting to make money again.…
Revenues for energy companies in the S&P 500 surged 34% during the first quarter of 2017. That was more than quadruple the S&P 500’s 7.6% jump in revenues. Wall Street now expects U.S energy companies to post an 18% rise in revenues when the second quarter is all said and done. Not only that, analysts expect the sector to report a more than 400% spike in second-quarter profits. For perspective, second quarter profits for the rest of the S&P 500 are expected to rise just 3.7%.

Once “the market” figures this out, watch out.…
Energy stocks are going to skyrocket just like gold stocks did in early 2016. Keep in mind, the bottoming process could take weeks or even months. So, wait for energy stocks to “carve a bottom” before diving in. That’s when stocks stop falling, trade in a tight range for a period of time, and then start heading higher. Stocks that carve a bottom often keep soaring. Just look at what GDX did after it carved a bottom early last year.



By waiting for energy stocks to carve a bottom, you’ll greatly limit your downside…without giving up a chance at big returns. I'll let you know when the time is right to invest in the energy sector. In the meantime, keep an eye on XLE and other energy funds like the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). Once they carve out bottoms, it will be a good time to buy.




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Wednesday, May 25, 2016

Hundreds of Oil Stocks Could Go to Zero…Will You Still Be Owning One of Them?

By Justin Spittler

The largest shale oil bankruptcy in years just happened. If you own oil stocks, you'll want to read today's essay very closely. Because there's a good chance hundreds more oil companies will go bankrupt soon. As you probably know, the oil market is a disaster. The price of oil has plunged 75% since 2014. In February, oil hit its lowest level since 2003.

Oil crashed for a simple reason: There’s too much of it. New methods like “fracking” have led to a huge spike in global oil production. Today, oil companies pump about 1 million more barrels a day than the world uses.

Last year, America’s biggest oil companies lost $67 billion..…

To offset low prices, oil companies have slashed spending by 60% over the past two years. They’ve laid off more than 120,000 workers. They’ve sold assets and abandoned projects. Some have even cut their prized dividends.

For many oil companies, deep spending cuts weren’t enough…

The number of bankruptcies in the oil industry has skyrocketed….

Bloomberg Business reported earlier this month:
Since the start of 2015, 130 North American oil and gas producers and service companies have filed for bankruptcy owing almost $44 billion, according to law firm Haynes & Boone.
And that doesn’t even include two “big name” bankruptcies in the last couple weeks. Two weeks ago, Linn Energy filed for bankruptcy, making it the largest shale oil bankruptcy since 2014. It owes lenders $8.3 billion.

A week later, SandRidge Energy declared bankruptcy. It became the second biggest shale oil company to go bankrupt. The company owes its lenders about $4.1 billion. Ultra Petroleum, Penn Virginia, Breitburn Energy, and Halcón Resources also filed for bankruptcy in the past couple weeks.

Hundreds more oil companies could go bankrupt this year..…

The Wall Street Journal reported last week:
This year, 175 oil and gas producers around the world are in danger of declaring bankruptcy, and the situation is nearly as dire for another 160 companies, many in the U.S., according to a report from Deloitte’s energy consultants.
Defaults by oil and gas companies are already skyrocketing. The Wall Street Journal continues:
Oil and gas companies this year have defaulted on $26 billion, according to Fitch Ratings data. That figure already surpasses the total for 2015, $17.5 billion.
Fitch, one of the nation’s largest credit agencies, expects 11% of U.S. energy bonds to default this year. That would be the highest default rate for the energy sector since 1999.

Many investors thought the oil crisis was over..…

That’s because the price of oil has surged 80% since February. Dispatch readers know better. For months, we’ve been warning there would be more bankruptcies and defaults. We said many oil companies need $50 oil to make money. The price of oil hasn’t topped $50 a barrel since last July. Even after its big rally, oil still trades for about half of what it did two years ago.

Oil prices will stay low as long as there’s too much oil..…

Although the world still has too much oil, the surplus has shrunk in the past few months. In February, the global economy was oversupplied by about 1.7 million barrels a day. Thanks to U.S. production cuts, the surplus is now just 1.0 million barrels a day. The number of rigs actively looking for oil in the U.S. has dropped by 80% since October. This month, the U.S. oil rig count hit its lowest level in 70 years.

However, many other countries aren’t cutting production at all. Saudi Arabia and Russia, two of the world’s biggest oil-producing countries, are both pumping near-record amounts of oil. Frankly, these countries don’t have much choice. Oil sales account for 77% of Saudi Arabia’s economy. And oil accounts for 50% of Russia’s exports. If these countries stop pumping oil, their economies could collapse.

Low prices have made it impossible for some oil companies to pay their debts..…

U.S. oil companies borrowed nearly $200 billion between 2010 and 2014. If you’ve been reading the Dispatch, you know the Federal Reserve is mostly to blame for this. It’s held its key interest rate near zero since 2008. This made it incredibly cheap to borrow money. When oil prices were high, the debt wasn’t an issue. Companies made enough money to pay the bills. That’s no longer the case. Today, many oil companies are burning through cash to pay their debts.

To make matters worse, many weak oil companies have been cut off from the credit market..…

Before prices collapsed, oil companies could refinance their debt if they ran into trouble. This could buy them time to sort out their problems. These days, many banks will no longer lend oil companies money. Bloomberg Business reported last month:
Almost two years into the worst oil bust in a generation, lenders including JPMorgan Chase & Co., Wells Fargo & Co. and Bank of America Corp. are slashing credit lines for struggling energy companies…
Since the start of 2016 lenders have yanked $5.6 billion of credit from 36 oil and gas producers, a reduction of 12 percent, making this the most severe retreat since crude began tumbling in mid-2014.
Oil stocks are still very risky..…

But that doesn’t mean you should avoid them entirely. As we’ve said before, oil stocks have likely entered a new phase. You see, when oil prices first tanked, investors sold oil stocks indiscriminately. Both strong and weak stocks plunged. In other words, investors “threw the baby out with the bath water.” You often see this behavior during a crisis.

Exxon Mobil (XOM), the world’s biggest oil company, fell 34% since 2014. Chevron (CVX), the world’s second biggest, dropped 48%. Now that oil has stabilized, the stronger companies are separating themselves from the weaker companies. This year, Exxon is up 15%. Chevron is up 11%. The crash in oil prices has given us a chance to buy world class oil companies at deep bargains.

If you want to own oil stocks, stick with the best companies..…

If you're going to invest in the sector, there are four key things to look for: 

Make sure you buy companies that can 1) make money at low oil prices. You should also look for companies with 2) healthy margins 3) plenty of cash and 4) little debt.

In March, Crisis Investing editor Nick Giambruno recommended a company that hits all of these checkmarks. It has a rock-solid balance sheet…some of the industry’s best profit margins…and “trophy assets” in America’s richest oil regions. It can even make money with oil as cheap as $35.

The stock is up 9% in two months. But Nick thinks it could just be getting started. After all, it’s still 30% below its 2014 high. You can get in on Nick’s oil pick by signing up for Crisis Investing. If interested, we encourage you to watch this short presentation. It explains how you can access Nick’s top investing ideas for $1,000 off our regular price.

This incredible deal ends soon. Click here to take advantage while you can.

You’ll also learn about an even bigger “crisis investing” opportunity on Nick’s radar. This coming crisis could radically change the financial future of every American. By watching this video, you’ll learn how to profit from it. Click here to watch.

Chart of the Day

Oil and gas companies are losing billions of dollars, we’re in earnings season right now. This is when companies tell investors if their earnings grew or shrunk last quarter. A good earnings season can send stocks higher. A bad one can drag stocks down.

As of Friday, 95% of the companies in the S&P 500 had shared first quarter results. Based on these results, the S&P 500 is on track to post a 6.8% decline in earnings. That would be the biggest drop in quarterly earnings since the 2009 financial crisis.

Oil and gas companies are a big reason U.S. stocks are having such a horrible earnings season.

As you can see below, first-quarter earnings for energy companies in the S&P 500 have plunged 107% since last year. Keep in mind, this group includes Exxon, Chevron, and other blue chip energy stocks.

Again, if you’re looking to buy oil stocks, make sure you “look under the company’s hood” before you buy it. Steer clear of companies that are losing money and have a lot of debt.




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Thursday, February 4, 2016

Here’s Why Crude Oil Stocks Haven’t Bottomed Yet

By Justin Spittler

Oil companies are hemorrhaging money. The oil market is in its worst downturn in decades. The price of oil has plummeted 72% since June 2014. Oil is trading below $30 a barrel for the first time since 2003.
If you’ve been reading the Dispatch, you know the world has too much oil. In recent years, technologies like “fracking” have unlocked billions of barrels of oil that were once impossible to extract from shale regions.
Global oil production has climbed 20% since 2000. Last year, global output hit an all time high. Yesterday, The Wall Street Journal reported the global oil market is oversupplied by 1.5 million barrels a day.
Because oil is leaving the ground faster than it’s being consumed, oil storage tanks are overflowing. 

Companies are now storing oil on tankers floating at sea, according to Bloomberg Business.

Low oil prices have slammed oil stocks..…
Since June 2014, Exxon Mobil (XOM), the world’s largest oil company, has dropped 27%. Chevron (CVX), the second biggest oil company, has plunged 38%. European oil giants Royal Dutch Shell (RDS-A), BP (BP), and Total S.A. (TOT) have plummeted 46%, on average, over the last 18 months. Together, these giant companies are known as the oil “supermajors.”

BP had a $3.3 billion net loss last quarter..…
And it lost $6.5 billion for the year, its worst annual loss in at least 30 years. Exxon sales fell 28% last quarter. Its profits plunged 58% to $2.78 billion, the company’s lowest quarterly profit since 2002. Chevron also booked its worst quarterly profit since 2002. Shell expects to report a 42% decline in profits for their fourth quarter.

Oil and gas companies slashed spending by 22% last year..…
Analysts expect another 12% cut this year to $522 billion, according to Reuters. The industry hasn’t spent that little since 2009…when the U.S. economy was going through its worst downturn in almost a century. More spending cuts are coming this year. Chevron plans to cut spending by 24% this year. The company laid off 10% of its employees in October. Exxon plans to cut spending by 25% in 2016. And BP plans to eliminate 9% of its jobs over the next two years.

The supermajors have not cut dividends yet..…
Regular readers know these oil giants pay some of the steadiest income streams on the planet. Shell hasn’t cut its dividend since World War II. Exxon and Chevron have both increased their annual dividends for at least the past 25 years, which earns them a spot in the “Dividend Aristocrats” club. Investors view these dividends as sacred. Some have even passed along their original shares to children and grandchildren, like grandma’s ring or the family farm. These giant oil companies have been paying regular dividends for decades, even through the 2001 dot com crash and 2008 financial crisis. Cutting their dividends would be a last resort.

The world’s oil giants may have to do the “unthinkable” if oil prices stay low..…
Financial Times reported in December,
…(J)ust weeks ago, BP and France’s Total each pledged to balance their books at $60 a barrel oil, saying they aimed to cover their dividends from “organic” cash flow by 2017.
…(E)ven at $60, the three biggest European majors will need to take further cost-cutting action to cover investor payouts…Total’s $6.8bn dividend would exceed its projected organic free cash flow by $800m two years from now. For BP, the cash shortfall is put at $500m…
These oil companies cut costs to be profitable at $60 oil. But with oil now at $30, they need to make even more drastic cuts.
BP is running out of places to cut spending according to Bloomberg Business.
While Chief Executive Officer Bob Dudley has trimmed billions of dollars of spending, cut thousands of jobs and deferred projects in response to the plunge in crude prices, BP’s cash flow still doesn’t cover investments and dividends…
BP has already cut “a lot” from capital expenditure, Chief Financial Officer Brian Gilvary said Tuesday at a press briefing in London. When asked how much room it has to reduce spending further before cutting into the bone, Gilvary said “we are around that zone.”

Standard & Poor’s (S&P) downgraded Chevron and Shell this week..…
Ratings agencies downgrade a company’s credit rating when they think the company’s financial health is getting worse. Like a person having a bad credit score, a downgrade can make it harder and more expensive for a company to borrow money. S&P cut Shell’s credit rating to the lowest level since 1990. S&P also put the debt of BP, Total, and Exxon on watch for downgrades.

S&P doesn’t think oil companies have cut spending enough. Bloomberg Business reported:
S&P’s moves come after the ratings company lowered its 2016 oil-price assumption Jan. 12, reducing Brent crude by $15 a barrel to $40. The 52 percent average price decline in 2015 won’t be matched by most companies’ cost and spending reductions, S&P said.
As regular readers know, the oil market is cyclical. It goes through big booms and busts. Eventually we’ll get an amazing opportunity to buy world-class oil companies at absurdly cheap prices. But with dividend cuts looming, the bottom likely isn’t in yet. We recommend avoiding oil stocks for now.

Louis James, editor of International Speculator, sees an opportunity to profit from cheap oil..…
Louis is our resource guru. He specializes in finding small miners with huge upside. Louis is an expert in the cyclical nature of commodities. He knows how to make money during booms and busts. And now, Louis sees opportunity in airlines. Jet fuel, which is made from oil, is a major operating expense for airlines. So, airline stocks often move up when oil drops. Last year, jet fuel prices fell by more than one-third. Major airlines are now raking in cash. The U.S. airline industry made $22 billion in profits during the first nine months of 2015, according to the Department of Transportation. That’s more than any entire year in its history.

In December, Louis recommended his favorite airline stock in International Speculator.....
The company has doubled its profits during the third quarter of 2015. On Monday, Louis said the company doubled its profits again last quarter.
The company just announced more-than-solid financial results for last quarter, doubling its quarterly profit. The company says it’s on track to hit the high end of its operational goals for the fiscal year. All great, but even better is that the stock rebounded from its recent slide on the news. That’s “proof of concept” that this stock can buck the market by delivering to the bottom line when other businesses are hurting, which was one of the main reasons we bought this stock.
The stock surged 4% with the quarterly news…and Louis thinks the stock will continue higher. You can learn more about Louis’ favorite airline by signing up for a risk-free trial to International Speculator.

Chart of the Day

BP just had its worst year in at least three decades. Today’s chart shows BP’s profits since 1985. Since then, the oil giant has made money in 27 years and lost money in 3. Last year, BP lost a record amount of money. It lost more than it did in 2010 when one of the company's oil rigs exploded in the Gulf of Mexico. BP has cut billions of dollars in spending. It’s laid off thousands of workers. Yet, it’s still bleeding cash. The company may soon have to do the unthinkable and cut its dividend.




The article Here’s Why Oil Stocks Haven’t Bottomed Yet was originally published at caseyresearch.com.


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Stock & ETF Trading Signals

Wednesday, January 13, 2016

A Stunning Move by the World’s Largest Oil Company

By Justin Spittler

Oil still can’t find a bottom. As Dispatch readers know, the oil market is in crisis. Since June 2014, oil has plunged 69%. It dropped 31% in 2015 alone. So far, 2016 has been even worse. The price of oil has fallen every day this year. On Friday, it closed at $32.88 a barrel, its lowest price since February 2004. Oil is already down 11% this year.

In October, Doug Casey predicted lower oil prices at the Casey Research Summit in Tucson, Arizona. I don't know how long [oil prices] will stay low. But they're going lower for the time being. Production is stable to up, but consumption is headed down with a slowing economy.…I'm still short oil at the moment.

The world has too much oil…..
As you likely know, new technologies like “fracking” have unlocked billions of barrels of oil that were impossible to extract before. U.S. oil production has nearly doubled since 2008. In June, U.S. oil production hit its highest level since the 1970s. Global oil output hit an all time high in 2014.

Falling oil prices have slammed the world’s largest oil companies…..
The world’s five largest publicly traded oil companies – Exxon Mobil (XOM), Chevron (CVX), Royal Dutch Shell (RDS-A), BP (BP), and Total S.A. (TOT) – lost $205 billion in value last year, according to The Wall Street Journal. Shell, the worst performer of the five, dropped 24% in 2015. Total, the best performer, dropped 3%.

Oil services companies, which sell “picks and shovels” to the oil industry, have also tanked. The Market Vectors Oil Services ETF (OIH), which holds 26 oil service companies, has plunged 59% over the past 18 months. Schlumberger (SLB) and Halliburton (HAL), the two largest oil services companies, are down 39% and 44% in the same period.

Eventually, this cycle will end with absurdly low prices for oil stocks. We’ll get an amazing opportunity to buy oil stocks at fire sale prices. But, for now, we recommend staying away until the world works through some of its oversupply of oil.

Saudi Arabia is in crisis…..
Saudi Arabia depends more on oil revenues than any other country. Oil makes up 83% of its exports. And about 80% of the country’s government revenue come from oil sales. Last year, the Saudi government spent $98 billion more than it took in…its first budget deficit since 2009.

The International Monetary Fund (IMF) expects the Saudi government to post a budget deficit as high as -19% of GDP in 2016. For comparison, the U.S. government has not posted a deficit higher than -9.8% since World War II. The IMF says Saudi Arabia could burn through its $650 billion cash reserve by 2020 if oil prices stay low. Since oil crashed in the summer of 2014, the country has already withdrawn at least $70 billion from its cash reserve.

To raise cash, the Saudi government may sell its crown jewel…..
Saudi Aramco is Saudi Arabia’s government owned oil company. As the world’s largest oil company, it owns the biggest oil fields in the world, and produces 13% of the world’s oil. The Saudi government has controlled the country’s oil industry since the 1970s. Last week, Financial Times reported that Saudi Arabia is considering an initial public offering (IPO) for Aramco. An IPO is when a company sells shares to the public.

According to Financial Times, an IPO would likely value the company “in the trillions of dollars.” To put that in perspective, Apple (AAPL), the world’s largest publicly traded company, is worth just $538 billion. Some estimates put the value of Saudi Aramco at more than 10 times that of Exxon Mobil – the world’s largest publicly traded oil company.

Switching gears, the U.S. automobile industry is setting record highs..…
U.S. automakers sold an all time record 17.5 million vehicles in 2015. The industry sold 5.7% more vehicles last year than it did 2014. Auto sales have now grown six years in a row. Despite record sales, U.S. automaker stocks are struggling. Ford (F) was down 9.1% in 2015, and has only gained 17% since the beginning of 2012.

General Motors (GM) was down 2.6% in 2015, and has gained 46% since the beginning of 2012. Both stocks have performed worse than the S&P 500, which has gained 53% since the beginning of 2012. Companies that sell parts and services in the auto industry have done much better. Tire maker Goodyear (GT) has climbed 99% over the past four years. Repair and parts shop AutoZone (AZO) is up 119%.

Cheap credit has fueled the boom in the auto industry…..
Forbes reported last month: During the third quarter of 2015, Experian determined the average amount financed for a new vehicle was $28,936, which is up $1,137 from the same period in 2014. What’s more, 44 % of buyers are now taking out loans for between 61 and 72 months, with 27.5% extending their new-vehicle indebtedness to between 73 and 84 months, with the latter representing an increase of 17.1 percent over the past year.

As Casey readers know, the Federal Reserve has made it incredibly cheap to borrow money. In 2008, the Fed cut its key interest rate to effectively zero to fight the financial crisis. It has held its key rate at extremely low levels ever since. Today, its key rate is just 0.25%...far below the historical average of 5%. The average interest rate on a car loan is just 4.3% today. In 2007, the average car loan rate was 7.7%.

E.B. Tucker, editor of The Casey Report, isn’t surprised by the auto industry’s record year..…
Here’s E.B.: Of course the auto industry had a record year…how could it not? I've seen auto rates as low as 0% for 84 months. When money is free, people buy now and think later. The U.S. auto loan market has grown 18 quarters in a row. Last year, it topped $1 trillion for the first time ever. There is now 47% more auto debt outstanding than credit card debt in the U.S.

E.B. says this will end badly. The auto leasing market is also booming because of easy money. Leasing made up 27% of car sales during the first quarter of 2015. Those leases will expire 40 months from now. And someone has to buy those vehicles. This year, over 3 million leased cars will hit the market. Even more will hit the market next year and the year after. All these used cars will create a huge glut. If the free money dries up at the same time, things will get ugly fast. That’s how booms built on easy money come to an end.

Chart of the Day

Oil has plunged to its lowest level in 12 years. Today’s chart shows the price of oil going back to 2004. As you can see, oil has sunk to its lowest level since February 2004. It’s now down 77% from the all time high it set in 2008. As we’ve explained, the world simply has too much oil. Oil is now cheaper than it was during the worst of the global financial crisis in 2008-9.




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Stock & ETF Trading Signals

Sunday, December 27, 2015

When Will They Bottom? Crude Oil, SP500, then ExxonMobil

A full blown bear market in energy resources and energy stocks has been underway since mid-2014. History shows that the price of crude oil typically bottoms before the broad stock market. And oil related stocks bottom at the same time or later than the broad market. The monthly chart below shows how oil bottoms several months before the stock market does. This provides us with some insight on when we should start to expect a bear market to end in the US stock market.
Many traders follow and trade shares of Exxon Mobil. And while the are big money maker I do feel their share price is going to underperform oil for some time. Based on my research XOM has acquired many new oil operations, which many require $70+ per barrel to be profitable. This has cost XOM a considerable amount of capital and is now left holding and operating business that are losing money with the current price of oil sub $40 per barrel.

Oil-98-Trader-XOM

Base on my analysis, economic data and forecast I feel as though oil will remain low for another 3-9 months below $60 per barrel. It will do this for several reasons but what matter to us is that it forced the majority of oil producers to cap and close off well and go out of business. While this is taking place stocks and the economy will rebalance through a strong economic recession and a bear market in equities that will last most if not longer than 2016. Take a look at the US stock market average (SP500 index) in the chart below. While this chart is a very basic and simple looking forecast understand that the stock market internals and market breadth have completely collapsed just s we saw in 2000 and again in 2008 months before the index collapsed and started bear markets.
Bear-Market2

Oil, XOM, and Stock Trading Conclusion:
In short, I expect oil to find a bottom during the next 1-3 months. Oil services stocks on average are likely to trade sideways and build a basing pattern. These oil services stocks will not breakout and rally until the broad stock market has bottomed which I expect to happen late in 2016 or early 2017. Unfortunately, oil and oil stocks collapsed so fast without any retest or pause for us to get short and enjoy the ride down for profits. I feel trading oil and oil stocks will be choppy and tough in the near year. Last week subscribers and I played the energy (XLE) for a quick two-day pop of 2-4% return depending on entry and exit. These types of plays will continue, but the big trend trade in oil and energy are a long way away yet.
The easier money will be likely be shorting the stock market (buying inverse ETFs) to profit as stocks collapse which is what I provide subscribers to my ETF trade alert newsletter.
Chris Vermeulen – www.The Gold & Oil Guy.com

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Friday, December 5, 2014

Russia and China’s Natural Gas Deals are a Death Knell for Canada’s LNG Ambitions

By Marin Katusa, Chief Energy Investment Strategist

In recent years, a number of Asian companies have been betting that Canada will be able to export cheap liquefied natural gas (LNG) from its west coast. These big international players include PetroChina, Mitsubishi, CNOOC, and, until December 3, Malaysian state owned Petronas.

However, that initial interest is decidedly on the wane. In fact, while the British Columbia LNG Alliance is still hopeful that some of the 18 LNG projects that have been proposed will be realized, it’s now looking less and less likely that any of these Canadian LNG consortia will ever make a final investment decision to forge ahead.

That’s thanks to the Colder War—as I explain in detail in my new book of the same name—and the impetus it’s given Vladimir Putin to open up new markets in Asia.

The huge gas export deals that Russia struck with China in May and October—with an agreed-upon price ranging from $8-10 per million British thermal units (mmBtu)—has likely capped investors’ expectations of Chinese natural gas prices at around $10-11 per mmBtu, a level which would make shipping natural gas from Canada to Asia uneconomic.

At these prices, not even British Columbia’s new Liquefied Natural Gas Income Tax Act—which has halved the post payout tax rate to 3.5% and proposes reducing corporate income tax to 8% from 11%—can make Canadian natural gas globally competitive.

These tax credits are too little, too late, because Canada is years behind Australia, Russia, and Qatar’s gas projects. This means there’s just too much uncertainty about future profit margins to commit the vast amount of capital that will be needed to make Canadian LNG a reality.

Sure, there are huge proven reserves of natural gas in Canada. It’s just been determined that Canada’s Northwest Territories hold 16.4 trillion cubic feet of natural gas reserves, 40% more than previous estimates.

But the fact is that Canada will remain a high-cost producer of LNG, and its shipping costs to Asia will be much higher than Russia’s, Australia’s, and Qatar’s. So unless potential buyers in Asia are confident that Henry Hub gas prices will stay below $5, they’re unlikely to commit to long-term contracts for Canadian LNG—or US gas for that matter—because compression and shipping add at least another $6 to the price.

Shell has estimated that its proposed terminal, owned by LNG Canada, will cost $40 billion, not including a $4 billion pipeline. As LNG Canada—whose shareholders include PetroChina, Korea Gas Corp., and Mitsubishi Corp.—admits, it’s not yet sure that the project will be economically viable. Even if it turns out to be, LNG Canada says it won’t make a final investment decision until 2016, after which the facility would take five years to build.

But investors shouldn’t hold their breath. It seems like Korea Gas Corp. has already made up its mind. It’s planning to sell a third of its 15% stake in LNG Canada by the end of this year.

And who can blame it? The industry still doesn’t have clarity on environmental issues, federal taxes, municipal taxes, transfer pricing agreements, or what the First Nations’ cut will be. And these are all major hurdles.

Pipeline permits are also still incomplete. The federal government still hasn’t decided if LNG is a manufacturing or distribution business, which matters because if it rules that it’s a distribution business, permitting is going to be delayed.

And to muddy the picture even further, opposition to gas pipelines and fracking is on the rise in British Columbia and elsewhere in Canada. While fossil fuel projects are under fire from climate alarmists the world over, Canadian environmentalists are also angry that increased tanker traffic through its pristine coastal waters could lead to oil spills.

Canada is now under the sway of radical environmental groups and think tanks like the Pierre Elliot Trudeau Foundation, which take as a given that Canada should shut down its tar sands industry altogether. For these people, there’s no responsible way to build new fossil fuel infrastructure.

Elsewhere, investors might expect money and jobs to do the talking, but Justin Trudeau’s Liberal Party, which has called for greenhouse gas limits on oil sands, is now leading the conservatives in the polls. (Just out of curiosity, does Trudeau plan on putting a cap on the carbon monoxide concentration from his marijuana agenda? But I digress.) If a liberal government is elected next year, it might adopt a national climate policy that would cripple gas companies and oil companies alike.

Some energy majors are already shying away from Canadian LNG. BG Group announced in October that it’s delaying a decision on its Prince Rupert LNG project until after 2016. And Apache Corp., partnered with Chevron on a Canadian LNG project, is seeking a buyer for its stake.

Not everyone is throwing in the towel. Yet. ExxonMobil—which is in the early planning phase for the West Coast Canada LNG project at Tuck Inlet, located near Prince Rupert in northwestern British Columbia—has just become a member of the British Columbia LNG alliance.

But Petronas was a key player. It was thought that the company would be moving ahead after British Columbia’s Ministry of Environment approved its LNG terminal, along with two pipelines that would feed it.

Instead, Petronas pulled the plug. We can’t know how many things factored into that decision nor whether it’s absolutely final. All the company would say is that projected costs of C$36 billion would need to be reduced before a restart could be considered. (That $36B figure includes Petronas’s 2012 acquisition of Calgary based gas producer Progress Energy Resources Corp., as well as the C$10 billion proposed terminal, a pipeline, and the cost of drilling wells in BC’s northeast.)

This latest blow leaves Canadian LNG development very much in doubt. In fact, most observers believe that Petronas’s move to the sidelines probably sounds the death knell for the industry, at least for the foreseeable future.
For more on how the Colder War is forever changing the energy sector and global finance itself, click here to get your copy of Marin’s New York Times bestselling book. Inside, you’ll discover more on LNG and how this geopolitical chess game between Russia and the West for control of the world’s energy trade will shape this decade and the century to come.



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Tuesday, April 29, 2014

Obama’s Secret Pipeline

By Marin Katusa, Chief Energy Investment Strategist

Isn’t it odd that an 800 mile pipeline that runs across environmentally sensitive land has been permitted without any mention in the media? Not a word about it from President Obama either.

Obama’s Secret Pipeline will be built over land that’s much more sensitive than that of the Keystone XL pipeline, which gets nothing but front page coverage. It will actually be 17% (six inches) larger in diameter than Keystone XL (36 inches) and it will transport natural gas, not oil.

Bill 138

The Senate of Alaska, the state in which the pipeline will be built, has just passed Bill 138, which makes the state a partner of three of the world’s largest oil companies, including one that has a horrible environmental track record on U.S. soil. In a nutshell, Alaska’s government is now partners with BP, ExxonMobil, and ConocoPhillips.

Only one more signature is required—Governor Sean Parnell’s—and it’s expected that he will sign the deal.

Not Even the US Government Wants US Dollars

For more than 100 years, the U.S. government has been receiving a royalty and tax revenue paid on the amount of oil or natural gas produced on American soil—a fee that is paid in U.S. dollars. Bill 138 has changed this forever.

Instead of Alaska receiving its dues in U.S. dollars, the state legislature has decreed through Bill 138 that the state will be paid “in kind.” In other words, the state will be getting its share of royalty and tax revenue in natural gas instead of U.S. dollars.

For the record, this is the first time ever that a US state has entered into a partnership like this. Essentially, Alaska is now a 25% equity partner with BP, ExxonMobil, and ConocoPhillips—which also requires the state to cough up cold, hard cash to build the entire project, including the 800 mile long, 42 inch wide pipeline.

Overall, the project is currently estimated to cost north of U.S. $50 billion, and we expect that when all the capital expense overruns and government inefficiencies are accounted for, the whole project will come in at more than U.S. $75 billion, using the total costs of similar projects for comparison.

But it will be 2015 before the final negotiations and the specific details of the partnership are agreed on, and remember, the devil is in the details. Who do you think will get the better end of the deal—a bunch of government bureaucrats with zero oil and gas experience, or the world’s top oil and gas producing companies? I know whom I’m betting on.

Which leads us to the point of this weekly missive.

And the Winner of Obama’s Secret Pipeline Is…

We already know which company will be building and operating Obama’s Secret Pipeline. The company I’m talking about has a lower price to earnings (P/E) ratio and a better yield than all of its peers. That’s good, because shareholders get paid a monthly yield for owning the stock while sitting back and watching the share price rise as well.

The Ultimate Oil Toll Booth

Think of it this way: this company charges the world’s most powerful oil and gas producers for every barrel of oil that passes through its “road network,” and now it can also charge the state of Alaska. Regardless of the price of oil or natural gas, this company gets its fee.

It’s a low-risk way to benefit from a high risk enterprise. This company is a current Buy in our Casey Energy Dividends portfolio. The Energy team is currently working hard on the upcoming issue, which will in detail cover the company that’s bound to gain big from Obama’s Secret Pipeline.

I know you haven’t heard about this pipeline yet, but you will soon enough.

That’s what we do here at the Energy Division of Casey Research: We’re the first to uncover breakthrough stories, and the first to uncover the best energy investment opportunities in the world. Doug Casey and I just got back from a whirlwind European tour, where we visited many of Europe’s most promising energy projects.

Here’s a picture of Doug Casey and me at Europe’s largest onshore drill site. This drill rig is 15 stories high and uses about 16,000 liters of diesel a day to turn the drills—which Doug and I are holding in this picture. As a side note, just the crank shaft that we’re holding costs U.S. $2 million—this rig is expensive and gigantic.


For you to get a better perspective on the true size of Europe’s largest onshore drill rig, here is a picture of Doug Casey and me with our friends Frank Holmes, Frank Giustra, and Matt Smith.

(From far left to right: Frank Holmes, Doug Casey, Marin Katusa, Frank Giustra, Matt Smith)

 

Do Your Portfolio a Favor and Try Out the Casey Energy Report

Doug Casey and I have done all the hard work for you. The current issue of the Casey Energy Report is a compilation of our Europe trip, including in-depth descriptions of our site visits and a new recommendation with a hugely promising project in an out-of-the-way European country that we personally checked out. The company is backed by mining giant Frank Giustra, and you bet he knows what he’s doing.

The Casey Energy Report comes with a free one year subscription to Casey Energy Dividends (a $79 value), including, of course, the upcoming May issue with our “Obama’s Secret Pipeline” pick.

There’s no risk in trying it: You have 90 days to find out if it’s right for you—love it or cancel for a full refund. You don’t have to travel 300+ days a year (as we do) to discover the best energy investments in the world—we do it for you.

If you don’t like the Casey Energy Report or don’t make any money within your first three months, just cancel within that time for a full, prompt refund. Even if you miss the cutoff, you can cancel anytime for a prorated refund on the unused part of your subscription. Click here to get started.

The article Obama’s Secret Pipeline was originally published at Casey Research



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Thursday, November 14, 2013

Exxon Mobil - The Surprising Big Chart Picture

While our trading partner Adam Hewsion was reviewing his energy portfolio this morning, he stopped and looked at the chart for Exxon Mobile (NYSE:XOM). He immediately noticed major resistance coming in at the $95 level. Can Exxon break through this major resistance level and take off to the upside?

He measured from the resistance at $95 all the way down to the low in July of 2010, the difference is around $35. If he then added $35 to the breakout point, it takes us to his target zone of $130 per share for Exxon. Now remember, the market must move over the $95 level for this to happen.

Just Click Here to take a look at Adam's chart work and details for a potential ExxonMobil trade.


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Thursday, August 1, 2013

Exxon Shares Fall after Big Earnings Miss

ExxonMobil's (XOM) $1.55 EPS, which fell far short of expectations, was the company's lowest EPS since Sept. 2010. (Q2 results)

Earned $6.86B on revenue of $106.47B billion after earning $15.9B on revenue of $127.36B in the year ago quarter when results were inflated by the sale of the Japanese lubricants division; removing those effects, net income fell 19%.

Upstream earnings were $6.3B, down 24.5% year over year, downstream earnings were $396M, down from $6.6B a year ago which included a $5.3 billion gain related to the Japan sale. Oil and gas production fell 1.9%.

Read the entire ExxonMobil earnings report



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Thursday, April 25, 2013

More earnings reports.....ExxonMobil [XOM], ConocoPhillips [COP], Hercules Offshore [HERO] and Occidental Petroleum [OXY]

Exxon Mobil (XOM) reports 1st quarter EPS of $2.12 beats by $0.07. Revenue of $108.8B misses by $11.03B. E&P earnings declined 9.8% to $7.04B as total oil and natural gas production fell 3.5% Y/Y to 4.395M boe/day. Refining and marketing earnings fell 2.6% to $1.55B while refining driven margins increased earnings by $780M. Chemical profits rose 62%; corporate and financing expenses fell sharply due to "favorable tax impacts." Shares -0.5% premarket.

Chairman Rex W. Tillerson comments....“ExxonMobil achieved strong results during the first quarter of 2013, while investing significantly to develop new energy supplies. ExxonMobil’s financial performance enables continued investment to deliver the energy needed to help meet growing demand, support economic growth, and raise living standards around the world......Read the entire ExxonMobil earnings report.

ConocoPhillips (NYSE: COP) today reported first-quarter 2013 earnings of $2.1 billion, or $1.73 per share, compared with first-quarter 2012 earnings of $2.9 billion, or $2.27 per share. First-quarter 2012 reported earnings included $0.7 billion from downstream operations prior to the separation of Phillips 66 on April 30, 2012.

Excluding special items, first-quarter 2013 adjusted earnings were $1.8 billion, or $1.42 per share, compared with first-quarter 2012 adjusted earnings of $1.8 billion, or $1.38 per share. Special items for the current quarter primarily related to asset sales and discontinued operations.

Following previous announcements to dispose of the company’s interests in Kashagan and the Algeria and Nigeria businesses, the associated earnings and production impacts for these assets have been reported as discontinued operations. This decreased adjusted earnings for first-quarter 2013 by $62 million, or $0.05 per share......Read the entire ConocoPhillips earnings report.

Hercules Offshore (Nasdaq: HERO) today reported net income of $35.2 million, or $0.22 per diluted share, on revenue of $205.3 million for the first quarter 2013, compared with a net loss of $38.3 million, or $0.28 per diluted share, on revenue of $143.3 million for the first quarter 2012. First quarter 2013 results include a non-cash tax gain of $37.7 million, or $0.24 per diluted share, relating to the Seahawk acquisition which was completed in April 2011.

John T. Rynd, Chief Executive Officer and President of Hercules Offshore stated, "Market conditions in the U.S. Gulf of Mexico remain strong, as dayrates continue to trend higher and contract backlog stays near record levels. Our first rig reactivation, the Hercules 209, is nearing completion, and we are assessing market demand for a second reactivation. Internationally, we continue to add scale and upgrade our global fleet. We recently commenced operations on the Hercules 266 under its long term contract, and closed on the acquisitions of the Hercules 267 (formerly Ben Avon) and the White Shark (formerly Titan 2).

These acquisitions demonstrate our ability to successfully deploy capital toward high return opportunities, while de-risking the investments with assets that have strong long term demand prospects and through long term contracts. We continue to look for acquisition opportunities to enhance our international footprint and high-grade our asset base"......Read the entire Hercules Offshore earnings report.

Occidental Petroleum Corporation (NYSE:OXY) announced income from continuing operations of $1.4 billion ($1.69 per diluted share) for the first quarter of 2013, compared with $1.6 billion ($1.92 per diluted share) for the first quarter of 2012. Net income for the first quarter of 2013 was also $1.4 billion ($1.68 per diluted share).

In announcing the results, Stephen I. Chazen, President and Chief Executive Officer, said, "Our first quarter domestic production of 478,000 barrels of oil equivalent per day, of which 342,000 barrels per day were liquids, set a record for the tenth consecutive quarter. Our total company production of 763,000 barrels of oil equivalent in the first quarter of 2013 was 8,000 barrels higher than production in first quarter of 2012.

"We executed well in the first quarter and to date are running ahead of our full-year objectives in our program to improve domestic operational and capital efficiencies. We have reduced both our domestic well and operating costs by about 19 percent relative to 2012. Overall, we generated cash flow from operations of $2.9 billion before changes in working capital for the first quarter of 2013 and invested $2.1 billion in capital expenditures"......Read the entire Occidental Petroleum earnings report.

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Sunday, July 8, 2012

No End in Sight For Norways Oil Workers Strike

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Norway's oil strike looks no closer to ending, with a government mediator saying workers and employers are still "far apart" in a dispute over pay and pensions. The industry association, which includes Exxon Mobil (XOM) and BP (BP), has threatened to halt all output from Tuesday. The tactic is probably designed to force the government to halt the strike, as it has done in the past.

Negotiations failed for a third time today.

From Bloomberg News.....

Norway’s oil strike continued for a 15th day after talks supervised by a state mediator failed to reach a compromise that would prevent the dispute from escalating to include all of the country’s offshore oil and gas production.

“There are no new talks planned and we don’t know where we will go from here,” Kristin Bremer Nebben, a spokeswoman for the Norwegian Oil Industry Association, which represents employers including Statoil ASA (STL), BP Plc (BP/) and Exxon Mobil Corp. (XOM), said in a phone interview today.

6 Things Successful Traders Have in Common

Private Empire - Exxon Mobil And American Power

If you were expecting "Private Empire", the latest book by two time Pulitzer Prize winning author Steve Coll, to serve as a hit piece on Exxon Mobil (XOM) (and "big oil" in general) you'll be somewhat disappointed.

For anyone unfamiliar with his previous work, Steve Coll's earlier books include the highly recommended "Ghost Wars", arguably the definitive geopolitical account of the activities of the CIA and other national intelligence agencies in Afghanistan and Pakistan from the time of the Soviet invasion up to the eve of the 9-11. Ghost Wars won the Pulitzer Prize in 2004 for general non-fiction and was one of the books a newly elected President Barrack Obama was reported to be reading upon entering office.

Steve Coll describes in an interview with Charlie Rose what lead him to want to write Private Empire and how his original idea for the book was to tell a broader story about the oil industry in the style of Daniel Yergin's "The Prize". He soon realized, however, that he needed a central character and Exxon was for him the only logical choice.

Coll's portrait of Exxon begins in March 1989 with the Exxon Valdez oil spill in Prince William Sound, Alaska, an event which made the company the most reviled in the United Sates. The book's timeline spans the subsequent transformation of the company, which was led by CEO Lee "Iron Ass" Raymond, up through its present day stewardship by current CEO Rex Tillerson.

Along the way we learn a great deal about Exxon, including its somewhat peculiar cult like corporate culture, its blockbuster merger with Mobil, its controversial stance and efforts on global warning, the access it enjoyed to political leaders such as Vice President Dick Cheney, its somewhat misleading approach to reporting oil reserves, and the company's record setting financial success. The book in fact makes for a compelling business case study and students of business history, strategy and management will find much of interest.

Read The Polycapitalist entire review



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Wednesday, June 27, 2012

SABIC and ExxonMobil to Proceed with Specialty Elastomers Project at Al-Jubail

Saudi Basic Industries Corporation (SABIC) and affiliates of ExxonMobil announced today they will construct a world scale specialty elastomers facility at the Al-Jubail Petrochemical Company (Kemya) manufacturing joint venture.

The facility will be integrated with the existing Jubail complex and is expected to be completed in 2015. The companies have approved the next stage of project development, engineering, procurement and construction (EPC).

The facility will have the capacity to produce up to 400,000 tonnes per year of rubber. Including halobutyl, styrene butadiene, polybutadiene, and ethylene propylene diene monomer (EPDM) rubbers, thermoplastic specialty polymers, and carbon black to serve local markets, the Middle East and Asia. Kemya has awarded the EPC contract for the elastomers facility to Technip, Tecnicas Reunidas and Daelim.

Kemya is a 50-50 joint venture between SABIC and Exxon Chemical Arabia Inc., an affiliate of ExxonMobil Chemical Company. The two companies have collaborated closely since 1980 when they established the joint venture, which produces polyethylene, ethylene, and propylene. The new synthetic rubber project represents a significant broadening of Kemya’s product portfolio.

Find out more about this venture at ExxonMobils Newsroom.

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Monday, May 7, 2012

Thursday, April 26, 2012

ExxonMobil Disappoints, Misses on Earnings

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“First quarter results reflect our ongoing focus on developing and delivering energy needed to support job creation and economic growth. Despite continuing economic uncertainty, we are progressing our robust investment plans to meet the energy demands of the future.

“Capital and exploration expenditures were $8.8 billion as we continue with plans to invest about $37 billion per year over the next five years. “We continued to generate strong cash flow from operations and asset sales with $21.8 billion in the quarter.

“First quarter earnings of $9.5 billion were down 11% from the first quarter of 2011.
“Oil equivalent production was down over 5% from 2011. Excluding the impact of higher prices on entitlement volumes, OPEC quota effects and divestments, production was down 1%.
“The Corporation distributed more than $7 billion to shareholders in the first quarter through dividends and share purchases to reduce shares outstanding.”

FIRST QUARTER HIGHLIGHTS

Earnings of $9,450 million, which included gains from asset sales of about $400 million, decreased 11% or $1,200 million from the first quarter of 2011. Earnings per share (assuming dilution) were $2.00, a decrease of 7%. Capital and exploration expenditures were $8.8 billion, up 13% from the first quarter of 2011. Oil equivalent production decreased over 5% from the first quarter of 2011.

Excluding the impact of higher prices on entitlement volumes, OPEC quota effects and divestments, production was down 1%. Cash flow from operations and asset sales was $21.8 billion, including proceeds associated with asset sales of $2.5 billion. Share purchases to reduce shares outstanding were $5 billion. Dividends per share of $0.47 increased 7% compared to the first quarter of 2011.

ExxonMobil and Rosneft announced the signing of agreements to progress a long term Strategic Cooperation Agreement to jointly explore for and develop oil and natural gas in Russia, and to share technology and expertise. Additionally, Rosneft will take equity in exploration and development projects in the United States and Canada.

In Romania, ExxonMobil’s affiliate drilled a successful deepwater new play test on the Neptun block in the Black Sea with the Deepwater Champion drillship and has additional 3D seismic data acquisition planned to support future drilling opportunities on the block.

ExxonMobil participated in a successful exploration well offshore Tanzania which discovered approximately 5 trillion cubic feet of recoverable gas in a high quality reservoir. A second exploration well is planned to test another prospect on the block.

Get more details on year to year earnings at ExxonMobil.com

Everything You Need To Know About Trading You Learned In Kindergarten

Thursday, October 27, 2011

ExxonMobil 3rd Quarter Profits Soar 41%

ExxonMobil's third quarter earnings surged 41% as the oil giant continued to benefit from high oil prices and stronger refining margins. Shares were up 1.4% at $82.20 in premarket trading as the results topped estimates.

The world's largest publicly traded oil company by market value has reported stronger results in recent quarters thanks to high oil prices and improved refining performance. Investors are watching this week to see how much of a drag, if any, recent oil price volatility and renewed concerns about the global economy will put on the sector's recent surge in profits.

ConocoPhillips posted a jump in adjusted third quarter profits on Wednesday, though charges weighed down the bottom line. Chevron is expected to post strong profits on Friday.

ExxonMobil reported a profit of $10.33 billion, or $2.13 a share, up from $7.35 billion, or $1.44 a share, a year earlier. Revenue increased 32% to $125.33 billion. Analysts polled by Thomson Reuters most recently forecast earnings of $2.12 a share on revenue of $113.56 billion.

Exploration and production earnings grew 54% amid higher prices for oil and natural gas, partly offset by a production decline of 4%. Refining and distribution business earnings were up 36% amid stronger refining margins. ExxonMobil said it spent $5.5 billion for stock repurchases, buying back 72 million shares. The total included $5 billion of buybacks to reduce shares outstanding.


Posted courtesy of Rigzone.Com


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Wednesday, January 5, 2011

Lower Oil Prices.....Blame it on the Gasoline!

Well that didn't take long. Even in the face of better job estimates crude oil bulls have already begun to show their "nervousness" as they trade oil down as low as 88.10 in the overnight session. The lowest crude oil has traded since December 20th. And what do they blame it on? Blame it on the gasoline.

The street is saying that massive snow storms during the recent holiday week have caused a large drop in gasoline demand. MasterCard Inc., the second biggest payments network company, said in its SpendingPulse report that motorists bought an average 8.41 million barrels of gasoline a day in the week ended Dec. 31, down from 9.61 million the previous week.

This even with continued draw down in crude inventories is giving us an insight into where the tolerance level of the commodity traders is. The bulls are screaming "$100 oil is just not in the cards". And that just might be the case. Weather you believe the long term oil production capabilities claimed by the Saudis or not the effect they have on the market is real. And they have made no secret of the fact that they do not want $100 oil.

The Saudi's, saviors of the U.S. economy. Strange as it sounds it just might be true as they know better then anyone that we can't have it both ways. We can't have high gas prices and an expanding U.S. economy. And still our politicians in this country [U.S.] still do everything in their power to keep us from increasing our own oil production and weaning ourselves off of foreign oil. Just sell electric cars, that is the answer. While we do everything we can to limit the production and expansion of energy production and distribution.

Good thing we don't have to trade what will happen in the future, we can trade today! And here's the numbers we'll be using to do just that......

Crude oil was lower overnight as it extends Tuesday's decline below the 20 day moving average. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term. If February extends this week's decline, the reaction low crossing at 87.43 is the next downside target. Closes above the 10 day moving average crossing at 90.61 would temper the near term bearish outlook. First resistance is the 10 day moving average crossing at 90.61. Second resistance is Monday's high crossing at 92.58. First support is the overnight low crossing at 88.16. Second support is the reaction low crossing at 87.43. Crude oil pivot point for Wednesday morning is 89.94.

Natural gas was lower due to profit taking overnight as it consolidates some of the rally off December's low. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term. If February extends the aforementioned rally, the 50% retracement level of the June-October decline crossing at 4.876 is the next upside target. Closes below the 20 day moving average crossing at 4.334 would confirm that a short term top has been posted. First resistance is Tuesday's high crossing at 4.707. Second resistance is the 50% retracement level of the June-October decline crossing at 4.876. First support is Monday's gap crossing at 4.454. Second support is the 20 day moving average crossing at 4.334. Natural gas pivot point for Wednesday morning is 4.644.

Gold was slightly higher due to short covering overnight as it consolidates some of Tuesday's decline. However, stochastics and the RSI are overbought and are turning bearish signaling that sideways to lower prices are possible near term. Closes below the reaction low crossing at 1372.70 are needed to confirm that a short term top has been posted. Closes above the 10 day moving average crossing at 1397.80 would temper the near term bearish outlook. First resistance is the 10 day moving average crossing at 1397.80. Second resistance is Monday's high crossing at 1424.40. First support is the reaction low crossing at 1372.70. Second support is the reaction low crossing at 1361.60. Gold pivot point for Wednesday morning is 1390.50.


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