Early Session Short Covering Rally in Crude Oil Ends With Mid Range Close

Crude oil closed lower on Wednesday as it extended Tuesday's decline below the 10 day moving average crossing at 81.36. A short covering rally tempered early session losses and the mid range close sets the stage for a steady opening on Thursday. Stochastics and the RSI are turning bearish signaling that sideways to lower prices are possible near term. Closes below the 20 day moving average crossing at 78.48 would open the door for a larger degree decline during January. If February renews this winter's rally, the 38% retracement level of the 2008 decline crossing at 84.82 is the next upside target. First resistance is the 10 day moving average crossing at 81.36. Second resistance is Monday's high crossing at 83.95. First support is the 20 day moving average crossing at 78.48. Second support is today's low crossing at 78.37.

Natural gas closed higher due to short covering on Wednesday as it consolidated some of Monday's decline. The high range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term. If February extends this week's decline, the 50% retracement level of the December-January rally crossing at 5.314 is the next downside target. First resistance is today's high crossing at 5.785. Second resistance is last week's high crossing at 6.108. First support is Tuesday's low crossing at 5.354. Second support is the 50% retracement level of the December-January rally crossing at 5.314.

The U.S. Dollar closed lower on Wednesday as it extends this week's decline. The mid range close sets the stage for a steady opening on Thursday. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term. If March extends this week's decline, the 50% retracement level of the November-December rally crossing at 76.66 is the next downside target. Closes above the 20 day moving average crossing at 77.87 would confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 77.69. Second resistance is the 20-day moving average crossing at 77.87. First support is today's low crossing at 76.74. Second support is the 50% retracement level of the November-December rally crossing at 76.66.

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A Picture of Our Post Peak Oil Food Supply

We have commented on several books in recent months that highlight how a world with limited oil resources will be forced to change. The idea that people will no longer be able to live in the suburbs and forced to move into metropolitan areas because of the lack of gasoline and high fuel prices seems extreme to us.

The authors of these books believe that much about how Americans live must change as a result of Peak Oil. One change they often point to is that our diets will be different as the cost to deliver certain foods will become prohibitively expensive. Often cited are certain fish and seafood that come from foreign locations. These authors also believe Americans will be reassessing how food supplies are grown, suggesting local gardens and farms will become our primary source of supply.

We recently read Mark Kurlansky's 2009 book,The Food of a Younger Land (Riverhead Books) that offers a peak at how we might be eating in an oil constrained world. The book was based on the lost WPA files. During the Great Depression, the government was confronted with how to deal with stubbornly high unemployment. The Works Progress Administration of the Franklin Roosevelt administration was created to develop projects that would employ workers throughout the economy on government payrolls.....Read the entire article.

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Oil Extends Drop in New York After Report Shows Increase in U.S. Supplies

Crude oil futures extended declines after a U.S. government report showed a bigger-than-forecast increase in inventories. Supplies rose 3.7 million barrels to 331 million in the week ended Jan. 8, the Energy Department said today in a weekly report. Inventories were estimated to climb by 1.5 million barrels, according to the median of 17 analyst estimates in a Bloomberg News survey. Crude oil for February delivery fell $2.17, or 2.7 percent, to $78.62 a barrel at 10:38 a.m. on the New York Mercantile Exchange. Oil traded at $79.25 a barrel before the release of the report at 10:30 a.m. in Washington.

Oil also fell after a government report showed the German economy probably stagnated in the fourth quarter, capping the worst year for Europe’s largest economy since World War II. Gross domestic product “remained at the level of the previous quarter,” Norbert Raeth, an economist at the country’s Federal Statistics Office in Wiesbaden, said today. Still, the figure for the last three months of 2009 is “surrounded by uncertainty,” he said.....Read the entire article.

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Crude Oil and Natural Gas Technical Outlook For Wednesday Morning

Nymex Crude Oil (CL)

As noted before, a short term top is in place in crude oil at 83.95. Pull back from there is still in progress and extends further to as low as 79.63 so far. At this point, intraday bias remains on the downside for 38.2% retracement of 68.59 to 83.95 at 78.08 and below. But downside should be contained by 61.8% retracement at 74.46 and bring rally resumption. Above 81.98 will flip intraday bias back to the upside. Further break of 83.95 will target upper trend line resistance at 87/88 level again.

In the bigger picture, the break of 82.0 resistance confirms that whole medium term rise from 33.2 has resumed. Nevertheless, there is no change in the view that it's a correction to fall from 147.27. Hence, we'd continue to look for reversal signal as crude oil approaches 50% retracement of 147.27 to 33.2 at 90.24, which is close to 90 psychological level. However, break of 68.59 support is still needed to confirm that rise from 33.2 has completed. Otherwise, outlook will be neutral at worst even in case of deep pull back.....Nymex Crude Oil Continuous Contract 4 Hours Chart.

Nymex Natural Gas (NG)

Natural gas drew support from mentioned 38.2% retracement of 4.157 to 6.108 at 5.363 and recovers. With 4 hours MACD crossed above signal line, intraday bias is turned neutral. Nevertheless, risk of another fall remains with 5.850 minor resistance intact. Below 5.354 will bring fall resumption towards 61.8% retracement at 4.902. Nevertheless, above 5.85 will flip intraday bias back to the upside for a retest on 6.108 resistance.

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 is still in progress and should target 38.2% retracement of 13.694 to 2.409 at 6.72 and beyond. On the downside, break of 4.157 support is needed to indicate that medium term rise from 2.409 has completed. Otherwise, outlook is neutral at worst even in case of deep pullback.....Nymex Natural Gas Continuous Contract 4 Hours Chart.

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Crude Oil Bears Appear to Have a Clear Near Term Advantage

Crude oil was lower overnight as it extends Tuesday's decline below the 10 day moving average. Stochastics and the RSI are turning bearish signaling that sideways to lower prices are possible near term. If February extends this week's decline, the 20 day moving average crossing at 78.49 is the next downside target.

Wednesday's pivot point, our line in the sand is 81.01

First resistance is the 10 day moving average crossing at 81.38
Second resistance is Monday's high crossing at 83.95

First support is the overnight low crossing at 79.63
Second support is the 20 day moving average crossing at 78.49

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Natural gas was lower overnight as it consolidates some of Tuesday's short covering bounce. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term.

If February extends this week's decline, the 50% retracement level of the December-January rally crossing at 5.314 is the next downside target. Closes above the 20 day moving average crossing at 5.728 would temper the near term bearish outlook in the market.

Natural gas pivot point for Wednesday is 5.517

First resistance is the 10 day moving average crossing at 5.694
Second resistance is the 20 day moving average crossing at 5.728

First support is Tuesday's low crossing at 5.354
Second support is the 50% retracement level of the December-January rally crossing at 5.314

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The U.S. Dollar was lower overnight as it extends this week's decline. Stochastics and the RSI remain bearish signaling that additional weakness is possible near term. If March extends the decline off December's high, the 50% retracement level of the November-December rally crossing at 76.66 is the next downside target.

Closes above the 20 day moving average crossing at 77.87 are needed to confirm that a short term low has been posted.

First resistance is the 10 day moving average crossing at 77.68
Second resistance is the 20-day moving average crossing at 77.87

First support is the overnight low crossing at 76.86
Second support is the 50% retracement level of the November-December rally crossing at 76.66

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Phil Flynn: When Bullish is Not Just Bullish Enough

When bullish is not just bullish enough.

Oil looked a bit tired to start the week, unable to build on early gains inspired by a weekend of what should have been exceptionally bullish news. Whether it was the strong economic data out of China or the increasing tensions around the globe with regards to Nigeria and Iran, or the ongoing oil price dispute between Russia and Belarus, the bulls should have continued to have their way with this market the way they had the week before. Of course when a market fails to rally on bullish news it means more than likely the bulk of the news was priced in or in this case perhaps overpriced in. Traders anticipated that the nasty cold had played a big part in pumping up the price of oil. This weekend was the weekend that was supposed to be the beginning of the new ice age, so some traders might have been shocked that temperatures could actually go up. Or maybe they are just be reminded that despite the cold and the strong demand out of China the globe still has ample supply.

As for the Russia and Belarus situation, Dow Jones reports that Russian oil supplies are continuing to and via Belarus to Europe despite the two countries' failure to sign an agreement for 2010, Belarus' state energy firm, Belneftekhim, said Monday, according to the RIA Novosti news agency. The market is also raising questions about the data out of China and in a sense it was priced in as oil went on that relentless rally. The bottom line is that the market action was not what the bulls had hoped for.

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Crude Oil Bulls Fail to Defend 10 Day, Lower Prices Likely

Crude oil closed lower on Tuesday and below initial support marked by the 10 day moving average crossing at 81.27 signaling that a short term top has likely been posted. The low range close sets the stage for a steady to lower opening on Wednesday. Stochastics and the RSI are overbought and are turning bearish signaling that sideways to lower prices are possible near term.

If February extends today's decline, the 20 day moving average crossing at 78.08 is the next downside target. If February extends this winter's rally, the 38% retracement level of the 2008 decline crossing at 84.82 is the next upside target.

First resistance is Monday's high crossing at 83.95
Second resistance is the 38% retracement level of the 2008 decline crossing at 84.82

First support is today's low crossing at 80.24
Second support is the 20 day moving average crossing at 78.08

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Natural gas closed higher due to short covering on Tuesday as it consolidated some of Monday's decline. The high range close sets the stage for a steady to higher opening on Wednesday.

Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term. If February extends this week's decline, the 50% retracement level of the December-January rally crossing at 5.314 is the next downside target.

First resistance is the 20 day moving average crossing at 5.721
Second resistance is the 10 day moving average crossing at 5.723

First support is today's low crossing at 5.354
Second support is the 50% retracement level of the December-January rally crossing at 5.314

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The U.S. Dollar closed slightly higher on Tuesday as it consolidated some of Monday's decline. The mid range close sets the stage for a steady opening on Wednesday. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term.

If March extends Monday's decline, the 50% retracement level of the November-December rally crossing at 76.66 is the next downside target. Closes above last Friday's high crossing at 78.44 would confirm that a short term low has been posted.

First resistance is the 10 day moving average crossing at 77.81
Second resistance is last Friday's high crossing at 78.44

First support is today's low crossing at 76.89
Second support is the 50% retracement level of the November-December rally crossing at 76.66

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Oil Falls as Cold Eases Grip

Oil prices fell for a second day Tuesday as a global cold spell eased its grip and pulled crude back from a 15 month high. Crude prices have jumped 20 percent in the past month as the coldest weather in years took hold. The weather has boosted demand for heating oil in the U.S. Northeast, and natural gas almost everywhere.

Even in the South, where fruit crops were endangered by frigid temperatures, homeowners were reaching for the thermostat. Duke Energy said Tuesday that its customers in the Carolinas set a record on Monday for power demand during the winter. Yet the dollar has had more to do with rising energy prices than the cold.

Every time the dollar falls, more investors pile money into dollar based crude trades. Investors can get more crude for less if they hold euros or other relatively strong currencies. The government said Tuesday that it expects retail gasoline prices to average $2.84 per gallon this year, an increase of 49 cents from 2009. The Energy Information Administration said prices are likely to pass $3 per gallon during the spring or summer, largely because of rising crude prices.

Those prices are rising even though the EIA said gasoline consumption was flat in 2009 compared with 2008 when the economy was in a tailspin.....Read the entire article.

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Oil Falls Most in Five Weeks as China Moves to Curb Liquidity

Crude oil dropped the most in five weeks as China, the world’s second largest oil consuming country, raised bank reserve requirements to curb a credit boom and prevent the economy from overheating. Oil fell as much as 2.1 percent as China increased the proportion of deposits banks must set aside for the first time since 2008. China boosted oil purchases to a record last year, the government reported this week. Crude prices also fell amid forecasts a U.S. cold snap will abate this week. “This is a significant move on the part of the Chinese, and they’re the difference makers on whether the oil demand picture remains robust,” said John Kilduff, a partner at Round Earth Capital, a New York based hedge fund that focuses on food and energy commodities. “If they’re going to try to trim the sails, it’ll be tough for crude to even keep $80 a barrel.”

Crude oil for February delivery fell 76 cents, or 0.9 percent, to $81.76 a barrel at 10:02 a.m. on the New York Mercantile Exchange. Earlier, the contract touched $80.80 in the biggest daily decline since Dec. 9. Futures rose to $83.95 a barrel yesterday, the highest since Oct. 14, 2008, following the report that China’s crude imports reached a record 203.8 million metric tons last year, or 4.1 million barrels a day.
Today’s move will help remove about 300 billion yuan of liquidity from the Chinese economy, according to estimates by Xing Ziqiang, an economist in Beijing at China International Capital Corp., ranked the top China local brokerage by Asiamoney magazine last year.....Read the entire article.

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Milder Weather, Alcoa Numbers Puts Downside Pressure on Crude Oil

Crude oil was lower due to profit taking overnight as it consolidates some of the rally off December's low. Milder weather moving across much of the upper United States this week is easing concerns over energy demand, which helped to pressure prices overnight.

Stochastics and the RSI are overbought and are turning bearish hinting that a short term top might be in or is near. Closes below the 10 day moving average crossing at 81.37 would signal that a short term top has been posted. If February extends this rally, the 38% retracement level of the 2008 decline crossing at 84.82 is the next upside target.

Tuesday's pivot point, our line in the sand is 82.81

First resistance is Monday's high crossing at 83.95
Second resistance is the 38% retracement level of the 2008 decline crossing at 84.82

First support is the 10 day moving average crossing at 81.37
Second support is the 20 day moving average crossing at 78.13

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Natural gas was lower overnight as it extends Monday's decline. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term. If February extends this week's decline, the 50% retracement level of the December-January rally crossing at 5.314 is the next downside target. Closes above the 20 day moving average crossing at 5.712 would temper the near term bearish outlook in the market.

Natural gas pivot point for Tuesday is 5.483

First resistance is the 10 day moving average crossing at 5.707
Second resistance is the 20 day moving average crossing at 5.712

First support is Monday's low crossing at 5.371
Second support is the 50% retracement level of the December-January rally crossing at 5.314

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The U.S. Dollar was higher due to short covering overnight as it consolidated some of Monday's decline. Stochastics and the RSI remain bearish signaling that additional weakness is possible near term.

If March extends the decline off December's high, the 50% retracement level of the November-December rally crossing at 76.66 is the next downside target. Closes above last Friday's high crossing at 78.43 are needed to confirm that a short term low has been posted.

First resistance is the 20 day moving average crossing at 77.87
Second resistance is last Friday's high crossing at 78.43

First support is Monday's low crossing at 76.95
Second support is the 50% retracement level of the November-December rally crossing at 76.66

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