So Much For One Hundred Dollars Per Barrel

Much was made of WTI crude oil passing the $100.00 mark and many thought that if we closed above $100 a barrel we would be in some type of new era for oil. Well that era is now over and lasted only a day as European debt fears, as well as the realization that the reversal of the seaway pipeline ultimately is more bearish then bullish. A terrible Italian and now Spanish debt auction stirred fears that the Euro zone credit woes are expanding.

Lack of confidence in the EU is causing buyers of Eurozone debt to command post EU record highs. Fear of a EU meltdown is overshadowing the fact that in the US our economy is starting to recover. More evidence yesterday came with a strong jobless claims number, retail sales, housing starts as well as other data that seems to suggest we are starting to move. The dollar and bond rallied in a safe haven bid and commodities started to tumble.

Get ready to party! Natural Gas supply hit a record high! The Energy Information Agency reported working gas in storage was 3,850 Bcf as of Friday, November 11, 2011. This represents a net increase of 19 bcf from the previous week. Stocks were 14 bcf higher than last year at this time and 224 bcf above the 5 year average of 3,626 bcf. In the East region, stocks were 58 bcf above the 5 year average following net injections of 9 bcf.

Stocks in the producing region were 148 bcf above the 5 year average of 1,098 bcf after a net injection of 11 bcf. Stocks in the West region were 18 bcf above the 5 year average after a net drawdown of 1 bcf. At 3,850 bcf, total working gas is above the 5 year historical range. Now the question is whether or not we will end the winter at a record.

Reuters News reports, "U.S. natural gas inventories should end winter at a 21 year peak after starting the heating season at an all time high for a third straight year, creating a buffer for consumers over the summer, according to a Reuters poll of traders and analysts. Without winter temperatures that come close to matching last year's severe cold, brimming inventories next spring could spell more trouble for prices, which hit a two year low this week of $3.11 per mm Btu despite the fast approaching peak heating demand season.

The Reuters storage poll put the consensus forecast for end winter inventories at 1.864 trillion cubic feet, nearly 300 billion cubic feet, or 19 percent, above average and the highest since 1991 when stocks in late March stood at 1.912 tcf. Such high inventories at the start of the spring and summer stock building season give utilities more bargaining power when rebuilding supplies for next winter, and can help lower power costs for consumers during summer when prices can go up as air conditioners come on."

Phil Flynn

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EIA: Recent Gasoline and Diesel Prices Track Brent and LLS, not WTI

Since the beginning of 2011, the spot price of West Texas Intermediate (WTI) crude oil, a traditional benchmark for the U.S. market, has trailed the spot price of other crude oils, including Brent, a global benchmark, and Louisiana Light Sweet (LLS), a Gulf Coast crude oil similar to crudes run by many U.S. refiners. Because few U.S. refiners have easy access to WTI crude oil, this price divergence has not directly translated to lower prices for U.S. refined petroleum products, such as gasoline and heating oil.

Instead, these product prices have more closely tracked the prices of Brent and LLS. Through October 25, the prices of Brent and LLS are up 20% and 18% in 2011, respectively; the prices of wholesale diesel fuel and gasoline on the U.S. Gulf coast are up 21% and 13%, respectively; meanwhile, the price of WTI is up just 2%.

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Phil Flynn: Meeting Madness

Meeting or no meeting West Texas Intermediate (WTI) oil continued to fly and the spread between the Brent crude continued to come in. The upward momentum in WTI was slowed a bit when European finance ministers sent chills down trader's spines. With the Euro Zone in termoil it is another reason why the WTI/ Brent spread has come in recent days.

The other reasons are as follows:
The market is pricing in the faster than expected return of Libyan crude. We continue to get reports from Libya that the damage to some of the major oil and gas fields are not that bad and the market expects production to ramp up quickly. The price of Brent was pricing in some worst case scenarios for the return of Libyan crude.

The other reason is that we have seen the spread come in is because of the continued decline in stocks of crude in Cushing, Oklahoma since the beginning of this conflict. In April Cushing stocks were at 41.9 million barrels in the beginning of the conflict and are now close to 31.1 million. That was ok when we thought the US was sinking into recession but now the US will have to see a higher price for WTI if we are going to be competitive for imports.

The other reason is that the Fed is laying the groundwork for QE3D! That will support oil as it has the gold and the silver markets.

The market will focus on Europe today but also the weekly supply reports from the Energy Information Agency. The API reported crude oil stocks up 2.7 million barrels. Gasoline up 153,000. Distillates down 1.8 million barrels. Stay tuned.

Phil Flynn

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Raymond Carbone: Will Oil Breakout or Breakeven?

WTI crude is surging more than 17% in the past month. Is this a breakout in oil prices? Phil Weiss, Argus Research Group, and Raymond Carbone, Paramount Options, discuss.



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CFTC Commitments of Traders (COT) Reports For August 2011

NYMEX WTI Crude Oil
Crude Oil futures open interest fell 0.8 percent in August. Commercial participants, who accounted for 53.6 percent of open interest, held net short positions; they increased their long positions by 1.4 percent and decreased their short positions by 2.2 percent. Non-commercial participants, who accounted for 41.6 percent of open interest, held net long positions. They decreased their long positions by 2.0 percent and decreased their short positions by 1.4 percent. Non-reportable participants, who accounted for 4.8 percent of total open interest, held net long positions; they decreased their long positions by 9.4 percent and increased their short positions by 30.2 percent.

NYMEX Henry Hub Natural Gas
Natural gas futures open interest increased 2.5 percent in August. Commercial participants, who accounted for 34.9 percent of open interest, held net long positions; they increased their long positions by 10.2 percent and increased their short positions by 9.5 percent. Non-commercial participants, who accounted for 58.9 percent of open interest, held net short positions. They decreased their long positions by 1.4 percent and decreased their short positions by 0.3 percent. Non-reportable participants, who accounted for 6.3 percent of total open interest, held net long positions; they decreased their long positions by 8.8 percent and increased their short positions by 7.3 percent.

NYMEX Heating Oil 
Heating oil futures open interest fell 0.8 percent in August. Commercial participants, who accounted for 66.8 percent of open interest, held net short positions; they increased their long positions by 7.4 percent and decreased their short positions by 2.2 percent. Non-commercial participants, who accounted for 23.3 percent of open interest, held net long positions. They decreased their long positions by 13.2 percent and increased their short positions by 5.8 percent. Non-reportable participants, who accounted for 9.9 percent of total open interest, held net long positions; they decreased their long positions by 8.3 percent and
decreased their short positions by 3.3 percent.

NYMEX RBOB Gasoline
Gasoline futures open interest fell 2.6 percent in August. Commercial participants, who accounted for 63.8 percent of open interest, held net short positions; they increased their long positions by 4.2 percent and decreased their short positions by 8.5 percent. Non-commercial participants, who accounted for 30.0 percent of open interest, held net long positions. They decreased their long positions by 5.5 percent and increased their short positions by 29.5 percent. Non-reportable participants, who accounted for 6.2 percent of total open interest, held net long positions; they decreased their long positions by 25.2 percent and decreased their short positions by 5.9 percent.

Crude Oil Technical Outlook For Wednesday Morning Sept. 14th

Crude oil met strong resistance in overnight trading as the continued financial crisis in Europe weighs on traders. Worse then expected retail spending in the U.S., the IEA cut in global oil consumption forecasts for 2011 and 2012, the prospect of Libyan oil production coming back online and the end of hurricane season all contribute to the inability of oil to push through the 50 moving average near $91 per barrel.

Closes below last Tuesday's low crossing at 83.47 would confirm that the corrective rally off August's low has ended while opening the door for a possible test of August's low crossing at 76.61 later this fall. If November extends the rebound off August's low, the May-July downtrend line crossing near 92.92 is the next upside target. WTI Stochastics and RSI are overbought this morning.

First resistance is last Wednesday's high crossing at 90.48. Second resistance is the May-July downtrend line crossing near 92.66. First support is last Tuesday's low crossing at 83.47. Second support is the reaction low crossing at 79.76. Crude oil pivot point for Wednesday morning trading is 89.51.

EIA: This Week In Petroleum....The Latest Twist in Crude Oil Price Patterns

Since the beginning of the year, a defining feature of the oil market has been the apparent "disconnect" between prices for West Texas Intermediate (WTI) and those for other crude oil grades. Prices for WTI have been trading at an ever widening discount to those of other grades, such as North Sea Brent, a close WTI look-alike in terms of gravity and sulfur content (Figure 1). The WTI futures curve and that of Brent futures also have parted ways: WTI futures remain in contango, meaning that prices for nearby contracts trade at a discount to those for later delivery, while Brent futures have swung into backwardation (prompt barrels trading at a premium to deferred ones). Recently the discount of WTI futures to Brent futures, a closely watched market indicator, has reached a record-high level. EIA's newly released Short-Term Energy Outlook (STEO) expects a large WTI discount to persist through the end of 2012. Recent market developments, however, warrant a fresh look at its likely causes.

Historically, periods of WTI discount versus Brent have generally been associated with a buildup in inventories at Cushing, OK, the delivery point of the NYMEX crude futures contract. It was thus not surprising that the recent widening of the WTI discount initially coincided with an unprecedented buildup in Cushing crude stocks (Figure 2), thanks to both surging domestic and imported crude supply in the Midwest and a significant expansion of local storage capacity. Seeking to explain the price discrepancy between Cushing and other crude grades, analysts pointed to a lack of pipelines out of Cushing that, in effect, stranded rising crude supplies in the landlocked Cushing and broader Midwestern markets, causing stocks to rise.

Also, any increase in the WTI-Brent spread has traditionally been associated with a corresponding shift in the WTI time structure: the spread between front-month and second-month WTI generally closely tracks that between front-month Brent and front-month WTI (Figure 3). That makes sense, given the transit time to move Brent barrels from the North Sea to the U.S. Midwest.

But neither of these features is evident in recent market trends. Far from building further, in line with the widening of the WTI discount, Cushing crude stocks have been falling fast in the last few months. At latest count, Cushing stocks were more than 9 million barrels below their early-April peaks - a reversal in inventory trends that has not stopped the WTI discount from widening further (Figure 2). Meanwhile, WTI "time spreads" - the price difference between prompt WTI barrels and WTI supplies for later delivery - have not kept up with the Brent-WTI spread. The contango in WTI futures has shrunk, with front-month WTI trading at a narrowing discount to the second-month contract, while the Brent-WTI spread has taken off - a development that normally would portend a widening WTI contango (see Figure 3).

Two considerations may help make sense of these somewhat counterintuitive developments. First, it may help to look beyond U.S. inventories and consider the stock situation in Brent's own regional market. As reflected in the steep backwardation in Brent futures markets, the European crude market continues to face very tight supply conditions. The disruption in Libyan crude exports, most of which normally end up at European refineries, drew European crude stocks well below their normal range (see Figure 4). Despite the release of oil from International Energy Agency strategic storage and increased Saudi exports, the tight crude oil supply situation in Europe has blunted the downward price impact of weak economic recovery. Current supply conditions in Europe have had as much impact on the transatlantic arbitrage and Brent-WTI spread as the buildup of excess supply in Cushing.

Second, rising inventories at Cushing should not be seen, in this case, as the exclusive, primary driver of the WTI price discount, but rather as a secondary symptom of underlying transportation bottlenecks. Those bottlenecks, which have been the real root cause of recent relative WTI price weakness, can also manifest themselves in other ways, such as rising transportation costs.

Bottlenecks are not airtight: depending on the pull from other markets, some oil can seep through, but at a cost. Such has been the case of the Cushing storage hub and the broader Midwestern market, from which rail, barge and truck shipments of crude have been on the rise. The greater the pull on Midwest crude supplies, the higher the transportation costs, as the least expensive ways out of the Midwest are tapped first and transportation costs increase for the marginal barrel.

Logistical bottlenecks hindering crude flows from Cushing and the Midwest to the U.S. Gulf Coast can be seen as the primary factor of the WTI disconnect, whether they express themselves through stock builds and an associated increase in marginal storage costs (thus increasing the slope of the contango), or through stock draws and a ramp-up in marginal transport costs (causing "location spreads" to widen). Notwithstanding the recent decline in Cushing inventories as markets resort to premium-cost transportation capacity to move discounted WTI crude, such capacity is itself constrained and may soon be overwhelmed by renewed growth in exports from Canada or regional refinery maintenance. Pipeline companies are going ahead with plans to add capacity out of the region, whether through new, dedicated lines (Keystone XL, awaiting regulatory approval) or by reversing and/or expanding existing infrastructure, as Magellan and others have announced. Until such plans come closer to being realized, or the crude supply balance in Europe significantly improves, the WTI discount will likely persist and perhaps widen further.

Gasoline and diesel prices advance for second straight week
The U.S. average retail price of regular gasoline increased this week, adding almost a nickel to reach $3.67 per gallon. The average price is $0.99 per gallon higher than last year at this time. The largest increase came on the West Coast where prices gained more than eleven cents per gallon over last week; the average price in region is now $3.86 per gallon, the most expensive in the country. The average price in the Rocky Mountain region gained an even four cents per gallon on the week. Moving east, average prices in the Midwest and on the East Coast rose 3-4 cents per gallon. Rounding out the regions, the Gulf Coast saw prices add about two cents per gallon to remain the least expensive in the country at $3.49 per gallon.

Similar to gasoline, the national average diesel price climbed almost a nickel to $3.87 per gallon. The diesel price is $0.94 per gallon higher than last year at this time. The West Coast average diesel price gained more than seven cents per gallon, the largest regional increase for the week. The Rocky Mountains followed, adding more than five cents to last week's price, while the Midwest registered an increase of just under five cents per gallon. The East Coast and Gulf Coast each saw price increases of about four cents per gallon.

Propane inventories level out
Last week, U.S. inventories of propane began to level out as the re-stocking season draws to an end. Total U.S. propane stocks drew slightly to end at 53.6 million barrels. Midwest regional propane inventories decreased by 1.1 million barrels, while Gulf Coast stocks increased by 1.0 million barrels. Rocky Mountain/West Coast regional stocks also grew by 0.1 million barrels, while East Coast inventories drew slightly. Propylene non-fuel use inventories represented 5.5 percent of total propane inventories.

Posted courtesy of the EIA's This Week In Petroleum 

Inventories and Threats of Chinese Tightening Give Commodity Bears The Advantage

Crude oil inventories spiked for a 2nd consecutive week, while on hand crude dropped in 3 out of 5 PAD districts the big gains in the Gulf Coast region created the net gain. Gasoline demand even fell for a 3rd consecutive week as gasoline inventories also made considerable gains. And oil prices showed the effects on Thursday touching a two week low of $88.00. But it wasn't all about inventories, commodities in general took a beating as traders seem to put more into the concerns over Chinese attempts to reel in their inflation worries with new rounds of tightening.


In a great article from Phil Flynn he reminds us "The Chinese, to keep up this charade, will have to buy more and more commodities from the global market to keep it going. The more artificially cheap commodities they feed to their ravenous marketplace will only leave the country wanting more and more. This of course would lead to an eventual monster bubble that if popped could take China’s economy down. The market already realizes what the Chinese should do".


Are the crude oil bulls in trouble here? According to Petromatrix GmbH yesterday’s crude oil's drop put it’s five day rolling mean below the nine day for the first time since Jan. 4. The decline of a short term indicator of momentum before a longer term measure is described as a “dead cross” and may be a sign that prices may correct lower. Olivier Jakob of Switzerland based consultant Zug reported “Brent and WTI are now suffering from a negative cross-over of the five to nine day moving average, and bulls will need to close today above the five day".

All the woes of Brent and the WTI as OPEC is increasingly facing calls to boost oil production as crude prices in Asia and Africa surpass $100 a barrel for the first time in two years. Nigeria’s Bonny Light grade, from which traders gauge the cost of West African oil, rose to $100.12 a barrel on Jan. 17, passing $100 for the first time since October 2008, according to data compiled by Bloomberg.

Our regular readers know how we feel about Fridays. The closing price on Friday will always tell us what traders are feeling comfortable about leaving on the table. As we go to press markets indicate that yesterdays sell off was a bit over done as prices have touched 90.22 before pulling back. Better top off your coffee, here's our numbers for Fridays trading.....


Crude oil was higher due to short covering overnight as it consolidates some of Thursday's decline. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term. Closes below the reaction low crossing at 88.45 would confirm that a short term top has been posted. If March renews this winter's rally, weekly resistance crossing at 93.87 is the next upside target. First resistance is this year's high crossing at 93.46. Second resistance is weekly resistance crossing at 93.87. First support is the reaction low crossing at 88.45. Second support is the reaction low crossing at 88.07. Crude oil pivot point for Friday morning is 90.10.


Natural gas was higher overnight and trading above the previous reaction high crossing at 4.707 thereby renewing the rally off December's low. Stochastics and the RSI are diverging but have turned bullish signaling that sideways to higher prices are possible near term. If February extends the rally off December's low, 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 4.448 are needed to confirm that a short term top has been posted. First resistance is the overnight high crossing at 4.747. Second resistance is the 50% retracement level of the June-October decline crossing at 4.876. First support is the 10 day moving average crossing at 4.514. Second support is the 20 day moving average crossing at 4.448. Natural gas pivot point for Friday morning is 4.641.


Gold was lower overnight as it extends this month's decline. Stochastics and the RSI are becoming oversold but remain bearish signaling that sideways to lower prices are possible. If February extends this month's decline, the reaction low crossing at 1331.10 is the next downside target. Closes above the 20 day moving average crossing at 1382.20 are needed to confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 1368.80. Second resistance is the 20 day moving average crossing at 1382.20. First support is the overnight low crossing at 1340.20. Second support is the reaction low crossing at 1331.10. Gold Pivot point for Friday morning is 1353.30.


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Crude Surges amid Demand Upgrades, China Imports Reach Record High

Crude oil strengthened further in European session as both the International Energy Agency (IEA) and the OPEC raised their forecasts on global oil demand as global economic recovery provides support for oil consumption. Also supporting oil prices was China's trade data in September. Strong imports for crude oil indicate resilience in domestic demand. WTI crude oil price soared to 82.9, up from yesterday's close of 81.67. Gold crawled above 1360 in European session as renewed selling pressure in USD raised demand for safe haven. GFMS forecasts the metal to reach 1400 by the end of the, citing low interest rates, the European sovereign debt crisis and fears about an economic slowdown factors supporting prices.

The IEA raised its global oil demand outlook to 86.9M bpd in 2010 and 88.2M bpd in 2011. That's +0.3M bpd more than last month's forecast for both those years. According the agency, the upgrades were driven by signs that 'the underlying demand trend in the OECD is more resilient than previously thought'. On the supply side, non-OPEC supply will increase to 52.6M bpd in 2010 (unchanged from August's estimates) from 51.5M bpd in 2009, followed by a rise to 53.1M bpd in 2010 (August: 52.9M bpd). Call on OPEC will be around 28.3M bpd (August: 28.8M bpd) in 2010 and 29.3M in 2011 (August: 29.3M bpd).

At an OPEC report released yesterday, the cartel also raised its demand forecast for 2010 to 85.6M bpd (August: 85.5Mbpd) while keeping that for 2011 unchanged at 86.6M bps. The 'stronger-than-expected, stimulus-led economic growth in the first half of the year' was the key reason for the upgrade. Non-OPEC supplies are revised higher for both 2010 and 10 as driven by growth in Brazil, Canada, Azerbaijan, and Kazakhsta. In contrast with the IEA, the OPEC revised lower the demand for the cartel's production for 2011 to 28.8M bpd from 28.9. The cartel forecasts demand for its production would be around 28.6M bpd for 2010 and 28.8M bpd for 2011. The estimate for 2010 represents a mild drop from August's reading.

The China trade report showed that export growth slowed to +25.1% in September from +34.4% in August, import growth slowed to +24.1% from +35.2% while trade surplus narrowed to $16.9B from $20B. The market was not disappointed by the slowdown but viewed it as a result of strong base effect last year. Imports for crude oil surged to 23.29M metric tons (2.69M bpd), up +35.4% and +11.4% on annual and monthly basis respectively. The record-high imports for crude oil signals the country's robust demand for the commodity.

Base metals rallied despite decline in imports from China. Rather investors were thrilled by the prospect that the market will be 'tighter' next year. LME copper surged to a 27-month high while lead also rose to the highest level in 6 months. Chile's Codelco, the world's biggest copper producer, expects a 'tighter' market next year as 'China is continuing to have a strong demand and from the supply side we have only a couple of new projects coming on- stream'. In September, China imported 368410 tons of unwrought copper and copper products (-7.68% y/y and -2.93% m/m) and 65772 metric tons of unwrought aluminum and aluminum products (-66.42% y/y and -9.44% m/m).

Courtesy Oil N'Gold .Com



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Crude Oil Trades Near Two Week High on Optimism Fuel Demand to Increase

Crude oil futures were little changed as U.S. stocks rebounded from an early decline and the dollar fluctuated against the euro. Oil rose 72 cents in the last hour of trading to erase a loss as the Standard & Poor’s 500 Index rebounded. The greenback was steady against the euro on renewed signs of debt problems at banks in the 16 nation region. “The equity market is back up unchanged, that brings crude unchanged,” said Richard Ilczyszyn, a market strategist at Lind-Waldock, a broker in Chicago. “Crude oil is very susceptible to currencies and equities right now.”

Crude for November delivery rose 3 cents to settle at $76.52 a barrel on the New York Mercantile Exchange. The price ranged from $75.52 to $77.17, the highest level since Sept. 14. “After a brief period over the past few weeks where the oil market appeared to disconnect from equities, the linkage appears to be alive and well again,” analysts including Lawrence Eagles at JPMorgan Chase & Co. said in a report today. The Reuters/Jefferies CRB Index of 19 commodities rose 0.2 percent to 284.08 at 2:30 p.m. in New York. The dollar gained 0.1 percent against the euro to $1.3474. November crude rose 2.1 percent last week as the dollar weakened after the Federal Reserve said it may take more steps to ease monetary policy.

The Standard and Poor’s index rose 0.1 percent at 2:30 p.m. before falling 0.6 percent to 1,142.16 at 4:28 p.m. Brent crude oil for November delivery fell 30 cents, or 0.4 percent, to settle at $78.57 a barrel on the London based ICE Futures Europe exchange. ‘Hard to Get Bullish’ “The dollar and the stock market are the two drivers,” said.....Read the entire article.


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China's Outlook Dominates the Market

While market sentiment was dominated by renewed concerns over the stability of the European banking system earlier in the week, better than expected bond auctions in Portugal and Poland eased the worries. Confidence was further boosted by the weekly drop in US jobless claims and China's trade data which suggested the country's demand for foreign goods remained strong.

Oil started the week moving within a narrow range with a soft tone but strength in stock markets drove price higher. Prices were further lifted after reports of shutdowns of production facilities. Gold jumped earlier in the week as sovereign risks in the Eurozone spurred demand for safe havens. However, failure to breach the record high triggered selloff.

Crude Oil
Oil price jumped on Friday as better-than-expected data from the US and China boosted optimism of the demand outlook. The front-month WTI contract jumped to a 4-week high of 76.73 before settling at 76.45, up +2.48% on weekly basis. Fuel prices also soared with heating oil and gasoline futures gaining more than +2%. Brent crude also rose but the increase was milder than WTI crude.

Movement of WTI-Brent spread was dramatic last week. The front-month WTI contract had widened to a $3.65 discount to ICE Brent on Tuesday (Sep 7) before narrowing to $1.71 on Friday. The change was mainly driven by shutdown of the largest pipeline operated by Enbridge Energy Partners due to a leak. According to the company, the pipeline can carry 670K bpd of oil from Canada to refineries in the US Midwest. The direction of the WTI-Brent spread in the near-term depends on when the pipeline can resume operations. Indeed, Enbridge closed another line, which transports oil from Indiana to Ontario, 6 weeks ago after a spill in Michigan. Repair of the line has been finished but US regulators has not yet permitted it to resume operations.

We do not expect WTI crude oil to return parity or even at premium to Brent crude in the short term as total crude oil inventory remains at record high and Cushing stock is abundant......Read the entire Oil N' Gold Focus Report



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Crude Oil Rallies to 17 Month High as US Job Data Shines

Crude oil jumped on the first day of trading after the Easter holiday as boosted by strong US economic data, particularly the employment report, and robust market sentiment. The benchmark contract of WTI crude oil rallied +2.06% and settled at 86.62. The contract reached an intraday high of 86.90, the highest level since October, 2008.

US non-farm payrolls increased +162K (consensus: +190K) in March while February's reading was revised -14K form -36K. Private payrolls surged +123K, the strongest gain since May 2007. Unemployment stayed at 9.7% but household employment increased for the 4rd consecutive month. Investors were excited as there are signs of improvement in the US job market.

Added to it were upbeat ISM indices. Manufacturing index improved to 59.6 in March from 56.5 a month ago, while services index also added +2.4 points to 55.4, the highest since May 2006. Oil exporters start raising prices as they see demands are set to improve further. Saudi Aramco, the world's largest state-owned oil company, increased official selling prices for its Extra Light crude oil to customers in the US and Asia for May. Price will be 40 cents higher than April's.

Going back to hard facts - oil inventory, US crude oil inventory has risen for 9 weeks and current level is +6.5% above 5-year average. Although stockpiles for oil products, such as gasoline and distillate, have dropped, they are still holding at very high levels.

Gold strengthened despite firmness in USD. The benchmark contract gained +0.68% to 1133.8. Encouraging US data inevitably raised inflation fear and this helped gold. Others in the precious metal complex also soared. Silver rose +1.27% to 18.12 while platinum and palladium advanced +2.04% and +3.39%, respectively.....Here's the charts!


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Oil Futures Plunge, Bond Markets Vote America

Statsweeper registered alerts across the entire WTI oil futures complex yesterday.

Prices fell dramatically, with all six of the nearest contracts down over 5%. Four-month futures took the biggest percentage dive, dropping 5.6% from $78.60 to $74.21 per barrel.

Front month futures fell 5.1%, from $77 to $73.06.



As widely reported, the fall in WTI was part of a larger sell off in commodities. Triggered by strengthening of the U.S. dollar.

With all the focus on yesterday's selling, there was less press on the things being bought. Most notably U.S. Treasury notes.

Alerts registered for falling yields on three-, five- and ten-year Treasury securities. Yields plunged as traders piled into these investments, driving up prices.

This is significant. Many analysts recently predicted investors would shun U.S. government debt as America's deficit spending rises and the nation's monetary base remains ballooned by more than $1 trillion compared to just 18 months ago.

But it appears when the markets get shaky, buyers still see U.S. bonds as the safe haven investment of choice.

Particularly interesting was investors' choice of Treasuries. Yields fell most notably for the three year note, dropping nearly 7% to 1.34% yield. This is the lowest yield registered since late December 2009.



Buying was also strong on the five-year note, which fell 4.6% to 2.29% yield. And the ten-year, falling 2.9% to 3.62% yield.

This contrasts with previous "flight to safety" buying of Treasuries, where purchases were focused on short-dated notes and bills. Often with maturities of 52 weeks or less.

Bill yields did fall yesterday. With the 52 week bill down 12.1% to 0.29% yield. But overall buying of these securities hasn't been as strong as might be anticipated.

52 week bills are still trading in the same range that's prevailed over the last few weeks. By contrast, two-, three- and five-year note yields appear to have broken resistance, moving markedly lower than recent trading ranges yesterday.



If this trend continues, it suggest investors are willing to lock in their money with the U.S. government for longer periods than they were previously comfortable with. A big vote of confidence for America and the U.S. dollar.

From The Staff at Oil Price .Com

Statsweeper is the financial community's premier data monitoring engine. The site tracks commodities, economics and finance data from around the globe, and alerts investors to critical changes and emerging trends. Visit www.statsweeper.com for more, and sign up for Pierce Points daily e-letter (www.piercepoints.com) for commentary on what the data mean for your commodities investments.
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The information provided here is based on data collected by www.statsweeper.com and is intended solely for informative purposes and is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade any securities or commodities named herein. Information contained herein is obtained from sources believed to be reliable, but is in no way assured. All materials and related graphics provided herein and any other materials which are referenced herein are provided "as is" without warranty of any kind, either express or implied. No assurance of any kind is implied or possible where projections of future conditions are attempted. Readers using the information contained herein are solely responsible for verifying the accuracy thereof and for their own actions and investment decisions.
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Cooling in China Raised Worries about Demand Recovery

Acceleration in China's tightening and fiscal problem in Greece caught the market's focus last week. While the former indicates slowdown in the pace commodity demand growth, the latter unveiled the risk of defaults in sovereign loans. Investors suspected recent rallies in commodities were excessive and therefore corrections were seen. The Reuters/Jefferies CRB Commodity Index slid -3.2% to 281.4.



Crude oil price ended last week with 5 straight days' of drops. The February contract slid -5.7% to close at 78 for the week. Selling pressures were heavy amid concerns on abundant inventory, slowdown in growth momentum in China as well as strength in USD.

Early last week, China released preliminary imports data for December. The readings were strong in most commodities. According the Customs, crude oil imports surged +24% to 21.26M metric tons during the month. On annual basis, the nation imported 203.8M metric tons in 2009, compared with 178.9M metric tons a year ago. The market was thrilled by the news and WTI crude oil price rallied to as high as 83.95, the highest level since October 13, 2008. In fact, emerging market, especially China, has been viewed as the demand growth driver for commodities. Anticipation for robust Chinese consumption has contributed for the 78% rally in crude price in 2009.

A Chinese proverb says 'while water can float a boat, it can also overturn a boat'. In order to stimulate investment and spending, the Chinese government implemented a RMB 4 trillion stimulus program, including government subsidies and tax breaks for home appliances and cars, last year. This has helped restored strong economic expansion in the world's third-largest economy. However, the record amounts of lending has also increased risks of asset bubbles and over heating in the economy. Therefore, the government began cooling since January 2010.....Read the entire article.

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Oil Price Made New Year-High But Be Cautious When Interpreting Inventory Data

Early last week, the commodity market extended weakness in the previous week as risk sentiment turned more cautious on decline in stock markets (particularly sharp fall in stock markets in China) and strength in USD. However, since the middle of the week, impressive crude inventory draw, rebounds in equity markets and better-than-expected economic data revived investors' confidence. The Reuters/ Jefferies CRB Index added +0.5% on weekly basis. WTI crude oil price for October made a new year-high at 74.72 Friday after strong US housing data. The benchmark contract finished the day +1.3% higher to 73.89, the highest closing price since October 2008.....Complete Article

Profit-Taking Seen In Risky Assets As Rallies Look Overdone

Massive profit taking is seen after crude oil surged above 72 as the rally over the past 3 days was mainly driven by strong macro economic data and robust sentiment. WTI crude oil is currently trading at 70.5, down $1 from yesterday's close. There have been heated debates on the impact of high oil price on economic growth. Fatih Birol of the International Energy Agency, told the press that prices higher than $70/bbl would hurt recovery. The Chief Economist said that 'if we see prices go much higher than that, we may see it slow down.....Complete Story

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Crude Oil & Energy Update - Interview with the CME Group's Joseph Ria

When you hear the news reporters talk about the price of
crude oil in the marketplace, they're generally talking about
WTI, which is West Texas Intermediate crude oil. It's a very light, sweet crude oil and the highest grade that's out there.


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Crude oil is based on and priced on the amount of sulfur that's
in the oil. It makes it easier or harder to refine base on the
amount of sulfur. WTI being the lightest and sweetest, is the
highest priced crude oil in the marketplace.

It is a benchmark delivered in Cushing, Oklahoma.

In benchmarks for crude oil and global pricing of crude oil, WTI
probably prices about 50% of the global pricing of crude oil.
Brent being basically the other pricing benchmark. There's two
out there, Brent being a little of a mixture of three different
grades of crude oil; BF&O, Brent 40 and Ossenberg. They're
all produced in the North Sea.

Please visit the link below to stream live the rest of the complimentary article from Joseph Ria. The link below will also give you exclusive access to three more video seminars and articles!

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Please feel free to leave a comment and let our readers know where you think crude oil is headed.