The Crude Oil Trader

Monday, December 21, 2009

Where is Crude Oil Headed on Tuesday?

CNBC's Bertha Coombs discusses the day's activity in the commodities markets, and looks ahead to where oil is likely headed tomorrow.

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Low Range Close in Crude Oil Set's The Stage For Lower Opening on Tuesday

Crude oil closed lower due to profit taking on Monday as it consolidated some of last week's rally. The low range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term.

Closes above the 20 day moving average crossing at 74.04 are needed to confirm that a short term low has been posted. If January resumes the decline off October's high, the 87% retracement level of this fall's rally crossing at 68.16 is the next downside target.

First resistance is the 20 day moving average crossing at 74.04
Second resistance is last Friday's high crossing at 74.69.

First support is the 10 day moving average crossing at 71.51
Second support is last Monday's low crossing at 68.59

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Natural gas closed lower due to profit taking on Monday as it consolidated some of this month's rally. The low range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term.

If January extends this month's rally, the 87% retracement level of this fall's decline crossing at 6.036 is the next upside target. Closes below the 20 day moving average crossing at 5.104 would temper the near term friendly outlook in the market.

First resistance is today's high crossing at 5.929
Second resistance is the 87% retracement level of this fall's decline crossing at 6.036

First support is the 10 day moving average crossing at 5.401
Second support is the 20 day moving average crossing at 5.104

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The U.S. Dollar closed higher on Monday as it extends this month's rally. The high range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term.

If March extends its current rally, the 38% retracement level of the 2008-2009 decline crossing at 79.72 is the next upside target. Closes below the 20 day moving average crossing at 76.29 would temper the near term friendly outlook in the Dollar.

First resistance is last Friday's high crossing at 78.50
Second resistance is the 38% retracement level of the 2008-2009 decline crossing at 79.72

First support is the 10 day moving average crossing at 77.25
Second support is the 20 day moving average crossing at 76.29

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China's Oil Demand for November Up by 18.7%

According to Platts, China's apparent oil demand in November soared 18.7% from a year ago as the country's economic recovery picked up momentum. November's surge in oil demand marked the third straight month that the world's second largest oil consumer posted double digit yearly growth in oil demand. Chinese oil demand was estimated to reach 33.67 million mt (8.22 million barrels per day) in November, versus 28.36 million mt a year ago, a Platts analysis of official data showed on December 21. November oil demand was slightly less than the 33.89 million metric tons (8.01 million b/d) seen in October.

"China has pulled out all the stops this year to be sure that its economy has performed well throughout the global financial crisis. That has had a dramatic impact on oil demand in the country," said Dave Ernsberger, Platts senior editorial director for Asia. "Lifting demand for oil by double digits month after month was not Beijing's goal when it injected half a trillion dollars into its economy this year, but it was one of the most significant consequences".....Read the entire article.

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Crude Oil Continues Climbing as Recovery Makes Most Accurate Forecasters Bullish

Oil’s biggest annual rally since 1999 is poised to continue with gains of at least 19 percent next year as the global economy recovers and OPEC curtails production, the most accurate crude forecasters say. Societe Generale SA’s Mike Wittner and Hannes Loacker at Raiffeisen Zentralbank Oesterreich AG, whose predictions this year that were within 9 percent of market levels, now say oil will average $92.50 and $88, respectively, in the fourth quarter of 2010, up from current prices of about $74 in New York. The median Wall Street estimate is for an increase to $83.

Oil is set to rise as China and India lead the world economy from its biggest economic shock since World War II, while the Organization of Petroleum Exporting Countries caps output, Wittner and Loacker said. Analysts say OPEC will keep supply targets unchanged at a meeting in Luanda, Angola, tomorrow, even as the International Energy Agency predicts fuel consumption will rise 1.7 percent next year. “With global demand growing and OPEC holding production flat, stockpiles are going to come down, and that’s bullish for prices,” said Wittner, 48, the head of oil market research at Societe Generale in London. Commodities will also benefit from the weak dollar and U.S. interest rates close to zero percent, he said.....Read the entire article.

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Crude Oil Bull's Take Firm Near Term Advantage

Crude oil was higher overnight as it extends last week's rally above the 10 day moving average. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term.

Closes above the 20 day moving average crossing at 74.08 are needed to confirm that a short term low has been posted. If January resumes the decline off October's high, the 87% retracement level of this fall's rally crossing at 68.16 is the next downside target.

First resistance is the 20 day moving average crossing at 74.08
Second resistance is last Friday's high crossing at 74.29

First support is the 10 day moving average crossing at 71.60
Second support is last week's low crossing at 68.59

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Natural gas was higher overnight and is extending this month's rally above the 75% retracement level of the October-December decline crossing at 5.807. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term.

If January extends this month's rally, the 87% retracement level of the October-December decline crossing at 6.036 is the next upside target. Closes below the 20 day moving average crossing at 5.116 would temper the near term bullish outlook in the market.

First resistance is last Friday's high crossing at 5.926
Second resistance is the 87% retracement level of the October- December decline crossing at 6.036

First support is the 10 day moving average crossing at 5.425
Second support is the 20 day moving average crossing at 5.116

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Crude Oil and Natural Gas Technical Outlook For Monday Morning

Nymex Crude Oil (CL)

As noted, recovery from 68.58 might still extend further for the moment. But still, upside is expected to be limited by 61.8% retracement at 76.87 and bring resumption of the fall from 82.0. On the downside, below 71.21 will indicate that recovery from 68.58 has completed and will flip intraday bias for this support first. Break will target 65.05 key support next. However, decisive break of 76.87 fibo resistance will argue that fall from 82.0 has completed and will turn focus back to this resistance.

In the bigger picture, at this point, crude oil is still limited by 55 days EMA (now at 74.49) and hence, we're favoring the case that medium term rise from 33.2 has completed at 82.0 with bearish divergence condition in daily MACD. Another fall is expected after finishing the current recovery from 68.58 and a break there will target 58.32 cluster support (50% retracement of 33.2 to 82 at 57.60). Break there will confirm this bearish case and indicate that the down trend from 147.27 might be resuming for another low below 33.2. However, sustained trading above mentioned 76.87 will dampen this bearish view and argue that another high above 82.0 might be seen before crude oil tops in 76.77/90.24 fibo resistance zone.....Nymex Crude Oil Continuous Contract 4 Hours Chart.

Nymex Natural Gas (NG)

Intraday bias in natural gas remains on the upside with 5.57 minor support intact. Current rally is still expected to extend further to 38.2% retracement of 13.694 to 2.409 at 6.72 next. On the downside, below 5.57 minor support will suggest that an intraday top is formed and bring consolidations. But downside should be contained well above 4.837 support and bring rally resumption.

In the bigger picture, medium term fall from 13.69 is treated as part of the long term consolidation pattern that started at 15.78 back in 2005 and might have completed at 2.409 already. Rise from 2.409 should not be completed yet and we would continue to anticipate an upside breakout of the recent range of 4.157/5.138 eventually. Above 5.318 will target 38.2% retracement of 13.694 to 2.409 at 6.72 and beyond. Nevertheless, break of 4.432 support will dampen this bullish case and turn outlook mixed again.....Nymex Natural Gas Continuous Contract 4 Hours Chart.

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Sunday, December 20, 2009

Natural Gas Trading Trend – Daily Chart

Trend lines provide excellent levels for support and resistance and this chart is a perfect example of that. Not much to say about this chart other than UNG is trading at resistance and volume is big. This tells me we could see lower prices from here or some sideways price action first.

Crude Oil Trend – Daily Chart

Oil had a great setup last week with many readers profiting from the oversold bounce off support which I pointed out on the daily chart last week. When buying into an oversold setup like this I scale in over 2-3 days in case prices dip lower as the selling dissipates. Average price was $35.75 and sold at first target of $37 for a 3.5% profit. Many of us still hold a core position with a tight stop.

The 60 minute chart shows this play and how the price popped once the sellers were cleared out.

Crude oil traded near $73 a barrel in New York after rising last week amid optimism demand will increase as the global economy recovers from its worst recession since World War II. Oil prices may gain this week on expectations that increasing fuel demand in the U.S., the largest energy consumer, will reduce inventories, according to a Bloomberg News survey. Reports this week are forecast to show increasing sales of existing and new homes in the country. “If the sentiment around demand recovery continues to improve I’d see upward support for oil prices,” Ben Westmore, a minerals and energy economist at National Australia Bank Ltd., said in Melbourne. “But an oversupply problem overshadows the market, and it’s hard to see oil pushing much higher.”

Crude oil for January delivery was at $73.29 a barrel, down 7 cents, in electronic trading on the New York Mercantile Exchange at 1:51 p.m. Singapore time. The contract, which expires today, rose 1 percent to $73.36 on Dec. 18, the highest settlement since Dec. 7. Futures climbed 5 percent last week, the most in two months, and have gained 64 percent this year. Prices had jumped after Iranian troops occupied an oil field in a disputed border region with Iraq. The troops withdrew from the al-Fakah well in the East Maysan field late Dec. 19 after an armed confrontation, Iraq’s deputy minister of oil Abdul Kareem al-Luaibi said yesterday. Separately, Iraqi television cited government spokesman Ali Al-Dabbagh as saying Iranian soldiers remained in Iraqi territory.....Read the entire article.

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