Why it Pays to Think Small About Oil

It’s clear that a good investor should have some exposure to oil and gas. But you need to know where to look – and here it pays to think small, not big. There’s a problem with buying into the oil majors, such as BP and Shell. They sell so much of the stuff each day that they a face a continual, expensive challenge to replenish their reserves. But small explorers are not in this position. This is of real significance to you as an investor. Let me explain…

If a small explorer makes a good oil discovery it does not simply offset the oil that it’s selling. Instead, it takes them from a position of having no oil and consequently, a very uncertain outlook into one where they have a profitable long term future. So shareholders who look to small explorers can make big money. But where exactly should you be looking?

For me, the crucial factor is whether the explorer’s license area has the potential to host a really major reserve. That is why I like Kurdistan, home of
Gulf Keystone (GKP) which this week further increased the estimated size of its Shaikan find – and Sterling Energy (SEY). I also like the Falklands, where the licence holders are Borders & Southern (BOR), Desire (DES), Rockhopper (RKH) and Falkland Oil & Gas (FOGL)......read the entire article

Oil Price Has Little Change Depsite IMF's Upgrades

Hovering around 70, the benchmark contract for crude oil changes little ahead of US opening. IMF's upgrades on economic forecasts and OPEC's production cut in September are bullish factors but investors probably feel nervous to push oil higher after the +5.8% rally yesterday.

IMF forecasts world economy will expand +3.1% in 2010, compared with +3.1% projected in July, as driven by growths of +9% and +6.4% in China and India respectively. As stated in the report, 'the recovery has started and financial markets are healing...'in most countries, growth will be positive for the rest of the year, as well as in 2010'. However, 'to sustain the recovery, private consumption and investment will have to strengthen as high public spending and large fiscal deficits are unwound'.

For OECDs, GDP in the US, Japan and the Eurozone are anticipated to rise by +1.5%, +1.7% and +0.3%. All of these estimates have been revised upward from Julys' projections. According to Bloomberg's estimates, OPEC's crude production declined 50K bpd from August to 28.395M bpd in September as led by reductions in Iraq, Saudi Arabia and Angola. For the 11 members (excluding Iraq) that are subject to quota, total output dropped -10K bpd to 26.045M bpd in September, though the production was still higher than the target.....read the entire article and charts!

Oil Poised to Test Resistance in the Mid $70s

Crude oil is poised to enter a “bullish channel” and test resistance at the mid $70 a barrel level after rising the most in almost six months yesterday. If prices close above $71.55 a barrel, oil is set to test resistance at $75.89, according to a technical analysis by Stephen Schork, president of consultant Schork Group Inc. in Villanova, Pennsylvania.

Crude oil for November delivery rose $3.90, or 5.9 percent, to settle at $70.61 a barrel yesterday on the New York Mercantile Exchange. “If you are bearish you’ve got a problem right now,” said Schork. “If the channel holds we’ll get a re test of the low to mid-$70s, which is where resistance has held since the summer”.....read the entire article

Crude Oil Technical Analysis From Oil N Gold

Crude oil's price powerfully pushed yesterday, after the release of inventory fundamentals touching the key resistance level at almost 70.90, which forms a support level for the main breached ascending channel, previously. However, reaching this level will be accompanied by the stochastic entering an overbought areas ; thus, making us expect for today, a downside move on an intraday basis where its first main targets are around 68.00, requiring trading to remain below level 70.90, essentially. The trading range for today is among the key support at 66.20 and the key resistance at 73.15. The general trend is to the upside as far as 47.20 remains intact with targets at 85.00.....Read the entire article

Oil Declines on Concerns U.S. Economy Struggling to Recover

Crude oil in New York fell after an unexpected drop in U.S. business activity and as companies cut more jobs than estimated, adding to concerns over the pace of revival in fuel demand in the biggest energy consuming nation.

Crude oil pared some of yesterday’s 5.9 percent gain after the Institute for Supply Management Chicago Inc.’s business barometer trailed economists’ estimates. Companies in the U.S. cut payrolls by a greater than forecast 254,000 jobs, a report from ADP Employer Services showed, indicating the labor market will be slow to recover.

“The poor economic news suggests oil should not go too much higher in price, because the U.S. economy is not improving as quickly as hoped,” Mike Sander, an investment adviser at Sander Capital in Seattle, said in an e-mail. “The economy is still in dire shape”.....read the entire article

Crude Oil Chart Damage Appears to be Repaired, For Now

Crude oil closed up $3.58 at $70.29 a barrel today. Prices closed nearer the session high today. The big gains today were supported by a bullish weekly storage report from the DOE, from a lower U.S. dollar and by the recent heightened tensions between the U.S. and Iran over its nuclear ambitions. Recent serious chart damage was mostly repaired today.

Natural gas closed down 3.8 cents at $4.837 today. Prices closed near mid range today. Prices are still in a three week old uptrend on the daily bar chart. Bulls still have upside technical momentum. The next upside price objective for the bulls is closing prices above solid technical resistance at the August high of $5.133.

The U.S. dollar index closed down 41 points at 76.94 today. Prices closed near mid range today. Bears still have the solid overall near term technical advantage. Bulls' next upside price objective is to close prices above solid technical resistance at 79.00.

Crude Oil Price Reacted Mildly Positive to Less Than Expected Distiallte Stock Gain

Crude oil inventory rose +2.8 mmb, compared with consensus of +2 mmb increase, to 338.4 mmb in the week ended September 29. The good thing is Cushing stock recorded significant drop of -1.5 mmb. Situation in oil product stockpiles was better than previously anticipated. Gasoline inventory drew -1.66 mmb while distillate inventory gained only +0.32 mmb. Both readings beat market expectations.

WTI crude oil price changes little after the report, only edging slightly higher to 67.5 from 66.5 before the release. Investors probably need to gauge the implications of a higher crude build with lower distillate build. Heating oil bounces to 1.71 while RBOB gasoline rises to 1.65 after the report. Lack of positive response from investors was also driven by disappointing US employment data and Chicago PMI. ADP reported -254K decline in employment in September following a -277K drop in the prior month. The market had expected.....Read the entire article

Bloomberg Analysis: Oil’s Sideways Trend Points to $70 Breakout

Crude oil has a greater chance of rising above $70 a barrel the longer it stays in the sideways pattern that has characterized trading in the past two months, according to National Australia Bank Ltd. Oil has been locked in a band of $65 to $75 a barrel since the start of August as traders weighed optimism over the prospects for a recovery in global demand against a supply glut. As the market has held its floor, prices will soon rise, said Gordon Manning, a Sydney based analyst, citing technical charts.

“The longer we’re in a sideways pattern, when we do break out, potentially the more powerful it’s going to be,” Manning said in an interview. “I wouldn’t be surprised to see that sort of ‘kick’ from around these current levels back up to about $70. There’s more of a risk of a $3 rally than a $3 fall from here”.....Read the entire article

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Crude Oil Rises as Growth in China, Japan Buoys Demand Outlook

Crude oil rose above $67 a barrel in New York as manufacturing expanded in China and Japan, buoying hopes for a rebound in fuel demand.

Oil is nonetheless heading for its first quarterly decline this year amid swelling fuel inventories in the U.S. The Energy Department will probably report that supplies of crude and fuel increased last week, according to a Bloomberg survey. Chinese manufacturing rose for a sixth month in September and Japanese industrial output climbed for a sixth time in August.

“Emerging markets have definitely been driving the demand recovery,” said Thina Saltvedt, an analyst at Nordea Bank AB in Oslo. “Industrial production has increased. We will see a gradual improvement in the economy, but prices have got ahead of the physical fundamentals”.....Read the entire article