CME Group Crude Oil, Natural Gas and Gold Market Recap for Tuesday July 10th

August crude oil prices trended lower throughout the session marking the lows of the day into the pit close. Early pressure in the crude oil market came from a resolution to the oil workers' strike in Norway and from weaker than expected Chinese oil import data for the month of June. The global oil demand story came under greater scrutiny following the EIA's monthly report that showed another downward revision in 2012 global oil demand. The agency sited lower economic growth forecasts. Another source of weakness in the crude oil market came from an afternoon sell off in US equity markets and gains in the US dollar. Expectations for this week's EIA crude oil stocks report are for a draw in the range of 1.25 to 1.50 million barrels.

Natural gas remains on a bit of a roller coaster ride... big decline on Friday, strong recovery on Monday and yet another sell off today. This type of trading action is very indicative of a market forming a top as well as a market that is laden with uncertainty. The main uncertainty that continues to hover over this market is will the rest of the summer weather result in enough cooling related demand to prevent the industry from hitting storage capacity limitations prematurely.

The EIA in the latest forecast (see below for the main highlights) is projecting inventory at the end of October to hit a record high of 4 TCF. With maximum storage capacity of just 4.1 TCF (EIA numbers) that leaves just 100 BCF storage space available for injections during the month of November... which are common...especially if winter type weather gets a late start. This also assumes that storage capacity is equally distributed in all three regions...which it is not. We could hit capacity limitation in the Producing region well before other regions.

The other issue overhanging this market is what will be the strategy of the utility sector in how much coal versus Nat Gas they consume for power generation. At current prices the economics are favorable to coal and I would expect utilities to burn more coal in lieu of Nat Gas and unless the Nat Gas price falls back to below the $2.70 to $2.75 level this move back to coal will continue. If so hitting record high inventory levels could then occur earlier than the EIA projection of the end of October.

After an early attempt to rally gold prices fell back and in the process the August gold fell back to this week's lows. Adverse currency market action, a noted reversal in equities and selling in a number of physical commodity markets seemed to leave gold in a patently bearish posture. Surprisingly gold was initially lifted on hopes for favorable progression in the Euro zone debt crisis but that story line ultimately seemed to be responsible for the washout in gold prices. In retrospect, seeing evidence of added weakness in the Chinese economy, in the wake of the Chinese trade deficit released seemed to spark fears that more serious slowing was in the offing before the Chinese begin to pull out the really aggressive stimulus guns.


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Crude Oil Declines as Norway Orders End to Strike

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Crude oil dropped from the highest close in two days after Norway ended a strike by energy workers that had threatened to halt production by western Europe’s largest crude exporter.

Futures slipped as much as 1.1 percent in New York after the Norwegian government ordered compulsory arbitration in the dispute, preventing a lockout of platform workers that was scheduled to start at midnight yesterday. Norway pumped 1.63 million barrels of oil a day in May, or about 1.8 percent of global consumption, data from the Norwegian Petroleum Directorate show.

“Traders are probably taking the premium out of oil now that they think the strike will be settled,” said David Lennox, an analyst at Fat Prophets in Sydney. “It was looking like the strike was going to deteriorate further. That risk premium is certainly coming out of crude.”

Oil for August delivery fell as much as 98 cents to $85.01 a barrel in electronic trading on the New York Mercantile Exchange and was at $85.15 at 11:05 a.m. Sydney time. The contract climbed 1.8 percent yesterday to $85.99, the highest close since July 5. Prices are 14 percent lower this year.

Read the entire Bloomberg article

CME Crude Oil, Natural Gas and Gold Market Recap

August crude oil prices trended higher throughout the US trading session, supported by the lack of progress in resolving an oil workers strike in Norway. Another source of support for the crude oil market came from weakness in the US dollar and ideas that weaker than expected global economic data could prompt central bankers to pursue more monetary stimulus. The product markets were also higher, supported by gains in crude oil and prospect that leaders in China could move to lower domestic gasoline and diesel prices in a maneuver to stoke economic growth.

So far the natural gas futures market has recovered about 2/3 of the loss from Friday's session as the market rethinks the impact on demand from the hot weather in the US even as the economics of coal to gas switching are still biased to the coal side. At the moment the macroeconomics comparing the spot Nymex Appalachian coal price to the spot Nymex Nat Gas price is favorable to the coal side. This coupled with the robust level of coal inventories at many utility sites should result in the utility sector starting to switch back to coal at the expense of Nat Gas for power generation. This is certain to have an impact on demand and will eventually have a negative impact on the underperformance of injections that has been experienced throughout the injection season so far.

On the other hand the massive heat wave that has engulfed a major portion of the US for the last several weeks is cooling down in the south for the next 6 to 10 days. However, the above normal temperatures are projected to return during the 8 to 14 day forecast period. As such Nat Gas cooling demand will likely be above normal for most of the month of July and possibly beyond that. However, the big question is ...will the above normal level of cooling related Nat Gas demand be enough to compensate for the loss of demand from switching back to coal for power generation. I do not think it will be enough and as such I still view the current level of Nat Gas futures prices to be overvalued or better said ahead of the price level that the current fundamentals would support.

Perhaps the gold market was lifted by soaring grain prices or perhaps the gold trade was simply inspired by a revival of easing prospects from the Chinese. It is also possible that gold and other physical commodity markets were lifted as a result of calls to extend the Bush tax cuts for lower incomes. It is also possible that gold saw its fortunes boosted by a bounce in the Euro, which at times was hopeful of some fresh maneuvering from EU officials.

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.

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CME Group Energy Market Report Recap for July 4th

Is the SP 500 Closing in on a Top?

August crude oil prices traded sharply higher during the US session and climbed to their highest level since May 31st. There were a number of supportive features supporting the advance including, hopes that global central bankers might offer up more stimulus to bolster growth, mounting tensions in Iran and reduced North Sea output. Reports earlier that Iran had successfully test fired mid range missiles was seen contributing to the fear premium in the crude oil market, by raising the threat of supply disruptions.

This comes along with talk that lawmakers were working toward a bill to block oil tanker traffic through the Straits of Hormuz. The oil workers strike in Norway continues and has reduced North Sea production by around 250,000 barrels per day. Further support for the crude oil market might have come on expectations that this week's EIA crude stocks report will show a draw in the range of 2.25 to 2.5 million barrels, which is a bit larger than the five year average draw for this week of the year of 1.1 million barrels.

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Crude Oil Spikes as Euro Leaders Relax Spains Debt Conditions

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CME: August crude oil prices traded sharply higher during the early morning hours, helped by an EU agreement aimed at relaxing borrowing costs in Spain and Italy. Risk assets across the globe appeared to embrace an agreement, and that has fostered ideas that global oil demand could turn higher. In addition to easing concerns over the European debt debacle, the crude oil market has also drafted support from tightening North Sea supply concerns.

COT: Crude oil was higher due to short covering overnight as it consolidates around the 62% retracement level of the 2009-2012 rally crossing at 80.33. Stochastics and the RSI are oversold and are turning neutral to bullish hinting that a short term low might be in or is near. Closes above the 20 day moving average crossing at 82.31 are needed to confirm that a short term low has been posted. If August extends this year's decline, the 75% retracement level of the 2009-2011 rally crossing at 73.28 is the next downside target. First resistance is the 20 day moving average crossing at 82.31. Second resistance is the reaction high crossing at 87.32. First support is Thursday's low crossing at 77.28. Second support is the 75% retracement level of the 2009-2011 rally crossing at 73.28.

Bloomberg: Crude posted its steepest intraday gain in eight months, increasing as much as 4.5 percent and trimming the biggest quarterly decline since the final three months of 2008. Oil gained after euro area leaders agreed to relax conditions on emergency loans for Spanish banks and possible help for Italy. Prices may advance after the European Union’s ban on the purchase, transport, financing and insurance of Iranian crude starts on July 1, a Bloomberg survey showed. Norway’s first industrywide energy strike since 2004 is in its sixth day.

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Crude Oil Bulls Reeling From Lowest Close in 9 Months

Crude oil is bouncing back in Thursday evenings session from the lowest close in more then 9 months. But still trading well below strong resistance above the $80 level as European Union actions against Iran and a strike in Norway still prove unable to push crude through resistance. But the bulls hold out hope.

Crude oil closed lower on Thursday renewing this spring's decline. The low range close sets the stage for a steady to lower opening when Friday's night session begins. Stochastics and the RSI are oversold but are neutral to bearish signaling that sideways to lower prices are possible near term. If August extends this spring's decline, the 75% retracement level of the 2011-2012 rally crossing at 73.28 is the next downside target. Closes above the 20 day moving average crossing at 82.47 are needed to confirm that a low has been posted. First resistance is the 20 day moving average crossing at 82.47. Second resistance is the reaction high crossing at 87.32. First support is today's low crossing at 77.28. Second support is the 75% retracement level of the 2011-2012 rally crossing at 73.28.

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Natural gas closed lower on Thursday as it consolidated some of this month's rally. The mid range close sets the stage for a steady opening on Friday. Stochastics and the RSI are overbought are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term. If July extends this month's rally, February's high crossing at 3.137 is the next upside target. Multiple closes below the 20 day moving average crossing at 2.524 are needed to confirm that a short term top has been posted. First resistance is Wednesday's high crossing at 2.975. Second resistance is February's high crossing at 3.137. First support is the 10 day moving average crossing at 2.667. Second support is the 20 day moving average crossing at 2.524.

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Gold closed lower on Thursday renewing the decline off this month's high. The low range close sets the stage for a steady to lower opening when this evenings session begins trading. Stochastics and the RSI are neutral to bearish signaling that sideways to lower prices are possible near term. If August extends last week's decline, May's low crossing at 1529.30 is the next downside target. Closes above the 20 day moving average crossing at 1601.90 are needed to temper the bearish outlook. First resistance is the 20 day moving average crossing at 1601.90. Second resistance is reaction high crossing at 1642.40. First support is the reaction low crossing at 1556.40. Second support is May's low crossing at 1529.30.

CME Recap Energy Market Report For Tuesday June 26th

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August crude oil prices registered an inside day trading range that was slightly higher on the session. The market spent most of the session within a tight trading range, despite fractional improvement in outside market sentiment.

Early support for the market came from gains in Brent crude oil and from expectations that US weekly crude stocks drew down last week. Prices took a negative turn in the wake of US economic data that showed Consumer Confidence falling by more than expected in June.

Some traders pointed to gains in Brent crude oil and concerns over a workers' strike in Norway that could tighten up near term supply as a force providing a late morning turnaround. As a result, the price differential between Brent and WTI crude oil increased by nearly $2.00 on the session.

Expectations for this week's EIA crude oil report are for a draw in the range of 750,000 to 1.0 million barrels.

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The United Kingdom’s Natural Gas Supply Mix is Changing

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Natural gas production in the United Kingdom is trending down due to declines in production from that country's North Sea fields. Imports via pipeline connections with Europe as well as seaborne deliveries of liquefied natural gas (LNG) now account for more than half of the U.K.'s natural gas supply.



Here are some key findings underpinning supply trends.

U.K. Production

Natural gas production in the U.K. has been falling for years. Average monthly U.K. natural gas production has fallen from around 350 billion cubic feet (Bcf) per month in 2000 to less than 200 Bcf per month in 2011. Natural gas production in the U.K. declined 22% between 2010 and 2011. Natural gas reserves have been steadily declining since 1999 as well; older fields account for a significant volume of current natural gas production in the U.K. The vast majority of U.K. production comes from offshore fields, and in 2010, 85% of gross offshore production came from fields that had been producing for more than 10 years, and 39% of gross offshore natural gas production came from fields that started flowing natural gas prior to 1991.



Pipeline Imports

U.K. annual pipeline imports from Norway rose significantly in recent years, up from just 36 Bcf in 2001 to 878 Bcf in 2010. Most of the growth since October 2006 is attributable to the Langeled Pipeline, which began service that month. Extending 725 miles through the North Sea, the Langeled Pipeline links the Nyhamna terminal in Norway via the Sleipner Riser platform in the North Sea to the Easington Gas Terminal in the U.K. From January 1, 2012 through May 17, 2012, imports from Norway on the Langeled Pipeline averaged about 2.5 billion cubic feet per day (Bcf/d). Earlier imports from Norway were directly from North Sea fields owned by Norway.

Since 2007, the U.K. has been a net importer of natural gas from Continental Europe via the Interconnector and BBL pipelines, as annual imports on these pipelines have exceeded annual exports. From January 1—May 17, 2012, net imports into the U.K. from Belgium and the Netherlands, together, have averaged about 1 Bcf/d. Natural gas flows between the U.K. and Belgium and the Netherlands vary depending on market conditions. When demand is peaking in the U.K., gas flows into the U.K.; when the U.K. is well-supplied with natural gas relative to demand, natural gas tends to flow into Europe from the U.K. Analysts can observe these changes daily; National Grid, the principal natural gas pipeline operator in the U.K., provides real-time estimates of natural gas flows at key import locations on its website.

LNG Imports

The U.K. has not been dependent on LNG for long. The first modern-era LNG terminal in the U.K.—the Isle of Grain terminal—began commercial service in the summer of 2005. LNG's role, however, has grown significantly since then. At times, LNG deliveries in the U.K. have provided up to 4 Bcf/d of total supply and accounted for 20% of the U.K.'s aggregate natural gas needs (see chart below). In the United States, only the New England region is as reliant on contributions from LNG to meet demand.

In 2011, total U.K. LNG imports exceeded 900 Bcf, with Qatar accounting for over 80% of U.K.'s LNG imports that year. Average daily LNG deliveries from re-gasification terminals have trailed off to 1.4 Bcf/d so far in 2012 (January 1 through May 17) compared with 2.7 Bcf/d for the same period in 2011. Since 2009, the South Hook terminal has received most of the LNG imports into the U.K. (see chart below).

Talisman, Statoil Buy Texas Shale in $1.3 Billion Joint Venture Deal

A Canadian-Norwegian joint venture is buying 97,000 acres of natural gas rich land in Texas' Eagle Ford play, the companies said Sunday. Calgary based Talisman Energy Inc. and Stavanger, Norway based Statoil are paying $1.325 billion for the land, which currently belongs to Enduring Resources, Talisman said. The project will be a 50-50 joint venture between the companies. Talisman will be the initial operator, but Statoil will operate at least half of the joint assets within three years.

Talisman estimated that the property contains the equivalent of 800 million barrels of oil. The property currently produces the equivalent of 5,500 barrels of oil per day, Talisman said. It said six wells are producing energy, and 20 more will have been drilled by year's end. Shale oil and gas deposits have become a key source of U.S. energy production. New techniques make it easier to reach oil and gas trapped beneath layers of rock deep underground. Both Talisman and Statoil have been expanding their shale gas operations in North America.

Courtesy of  INO.com Market and Intraday News


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U.K. Gas Plunges on Excess LNG, Supplies From North Sea, Norway

U.K. natural gas contracts plunged amid lower than normal demand and excess flows of liquefied gas and fuel from the North Sea and Norway. Wholesale gas for same day delivery dropped as much as 13 pence, or 59 percent, to 9 pence a therm, according to broker ICAP Plc. That’s the lowest since October 2006 and equal to $1.49 a million British thermal units. A therm is 100,000 Btus. It was at 15 pence at 4:40 p.m. in London. Gas for the rest of the working week fell 6 pence to 17 pence a therm. U.K. gas demand in the 24 hours through 6 a.m. tomorrow is forecast at 173 million cubic meters, according to National Grid Plc data. That’s 9 million less than the last working day of last week and 37 million below normal for this time of year as the recession and unseasonably warm weather cut demand.....Complete Story

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BG Group agreed to pay $1 billion for a stake in Dallas based Exco Resources Inc.'s shale gas properties in Texas and Louisiana, becoming the latest European oil major to move into U.S. unconventional natural gas. The deal follows similar moves by StatoilHydro ASA of Norway and the British oil major BP PLC, who both recently acquired interests in shale gas fields in the U.S., one of the hottest new hydrocarbon plays.....Complete Story

Chinese Refining Price Increases, California Says No To New Drilling

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Crude oil rose after a report showed that Chinese refineries bolstered processing rates for the first time in five months, signaling the government’s economic stimulus measures improved fuel demand. China refined 29.4 million metric tons of crude, or about 6.92 million barrels a day, in March, the China Mainland Marketing Research Co. said in a statement today. That’s up 0.7 percent from a year earlier. U.S. stocks drifted between gains and losses....Complete Story

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California officials expressed unanimous opposition Thursday to new offshore oil and gas drilling in a meeting U.S. Interior Secretary Ken Salazar held to gauge public sentiment on the issue. Opening the California coast to drilling for oil and natural gas would be an environmental and economic disaster for the state, said Sen. Barbara Boxer, D-Calif. The most populous U.S. state relies on tourism, recreation and other coastal industries....Complete Story

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Norway's oil and gas production and industry risk going into serious decline by the mid-2020s if a ban on exploration in unexplored offshore areas in the North isn't lifted quickly, oil chiefs say. Combined oil and gas production from Norway, the second-biggest gas exporter to Europe after Russia, and the world's fifth-largest oil exporter, is at a peak that operators hope to sustain until at least 2015, while stemming the decline beyond that....Complete Story


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Crude Oil Industry Headline News

"Crude Oil Declines After IEA Reduces Global Demand Forecast"
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Indonesia has rejected a proposal by Exxon Mobil Corp to develop the giant Natuna D-Alpha gas field, since it believes the contract held by the U.S. oil major expired in 2005....Complete Story

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Norway and China have signed a strategic agreement in Beijing for enhanced cooperation in the petroleum sector....Complete Story

"Crude Oil Prices Up Slightly"
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