Weekly Fundamental Outlook For Crude Oil

Despite brief rebound to 74.82 after release of strong USD GDP, crude oil price dived to one month low at 72.43 amid rally in USD. The benchmark contract ended the week at 72.89, losing -2.2% on weekly basis and recorded the third consecutive weekly decline after surging to 83.95, the highest level in 15 months, in the beginning of January.

Fundamentals in the US energy market remain weak. The US Energy Department reported crude oil inventory dropped -3.89 mmb to 326.7 mmb in the week ended January 22. Cushing stocks also drew-0.69 mmb, the 5th consecutive weekly decline. We believe the main reason for the huge decline in crude stocks was the closure of the Houston Ship Channel, which serves the largest US petroleum port, shut for 2 days because of fog. It was reopened on January 21. Also, the oil-tanker spill in the Sabine Neches Waterway has led refiners to cut back production. We expect to see another draw next week as the oil spill is still impacting imports.

Both gasoline and distillate rose +1.99 mmb to 229.4 mmb and +0.36 mmb to 157.5 mmb respectively. Demand for gasoline edged slightly high on weekly basis but the level at 8.619M bpd remained below last year's level. Beware that last year's demand was very weak as it was in the midst of the worst of economic crisis. Distillate inventory built modestly compared with market exception or a draw. Imports surged +142%, on weekly basis, to 0.658M bpd, the highest level never seen since 2006. Demand dropped -2.6% to 3.725M bpd during the week. The level was still -12.5% below last year's level.

In coming few years, oil demand will be heavily relying on growth in Asian market. According to the International Energy Agency (IEA), preliminary data indicated that China's total oil demand soared +16.4% yoy in November, driven by both government spending and supply disruption due to cold weather. Demand is anticipated to have increase +7.2% to 8.5M bpd in 2009, followed by a +4.3% rise to 8.8M bpd in 2010. China takes up almost 10% of world oil demand and that's why market sentiment has deteriorated dramatically after China guided yields higher, increased required reserve ratio and limited bank lending. The market worried that the growth engine will lose momentum this year.

Other than China, India is another hot spot. Total oil demand probably rose +5.4% in 2009, followed by another +3% this year. Robust oil consumption in India was driven by gasoline demand which, in turn, was due to strong car sales.....Read the entire article.



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Companies Say Alaska Gas Pipeline Could Cost $41Billion

Companies working with the state of Alaska to develop a major natural gas pipeline estimated Friday that the project would cost $20 billion to $41 billion, depending on the route. The Alaska Pipeline Project seeks to move natural gas from the harsh North Slope to market in Alaska, through Canada and to the Lower 48.

The high end of the estimate is at least a billion more than earlier thought, but project officials believe the pipeline is economically viable and could start carrying gas in about 2020. More details of the plan came in a filing Friday with federal regulators, the first step toward an "open season," when companies behind the project will court gas producers and try to secure commitments for shipping deals.

TransCanada Corp., based in Calgary, Alberta, is working with Irving, Texas based Exxon Mobil Corp. to advance the project. The state of Alaska has promised to reimburse up to $500 million of eligible costs. A rival project by Britain's BP PLC and Houston-based ConocoPhillips is also moving ahead, though its difficult for many, given the economics involved, to see more than one project going forward.

Tony Palmer, TransCanada vice president of Alaska Development, told reporters Friday that he believes the best and most effective way to bring the project forward is to form an alliance between the state, TransCanada and the North Slope's current major players, Exxon Mobil, BP and ConocoPhillips. It's during open season when shippers interested in moving gas to markets in Alaska and outside the state indicate which their preferred route.....Read the entire article.

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Crude Oil Low Range Close Sets The Stage For Lower Open on Monday

Crude oil closed lower on Friday and spiked below support marked by December's low crossing at 72.45. The low range close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI are oversold but remain neutral to bearish signal that sideways to lower prices are possible near term. If March extends today's decline, the 75% retracement level of the September-January rally crossing at 71.70 is the next downside target. Closes above the 20 day moving average crossing at 78.74 are needed to confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 75.60. Second resistance is the 20 day moving average crossing at 78.74. First support is today's low crossing at 72.43. Second support is the 75% retracement level of the September-January rally crossing at 71.70.

Natural gas closed lower on Friday and tested the 62% retracement level of the December-January rally crossing at 5.114. The low range close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term. If March extends this week's decline, the 75% retracement level of the December-January rally crossing at 4.919 is the next downside target. Closes above the 20 day moving average crossing at 5.560 are needed to confirm that a low has been posted. First resistance is broken trading range support crossing at 5.327. Second resistance is the 10 day moving average crossing at 5.456. First support is Thursday's low crossing at 5.060. Second support is the 75% retracement level of the December-January rally crossing at 4.919.

The U.S. Dollar closed higher on Friday as it extends this month's rally. The high range close sets the stage for a steady to higher opening on Monday. Stochastics and the RSI remain neutral to bullish signaling that sideways prices are possible near term. If March extends this month's rally, the 38% retracement level of the 2009-2010 decline crossing at 79.71 is the next upside target. Closes below the 20 day moving average crossing at 77.98 would confirm that a short term top has been posted. First resistance is today's high crossing at 79.65. Second resistance is the 38% retracement level of the 2009-2010 decline crossing at 79.71. First support is the 10-day moving average crossing at 78.48. Second support is the 20 day moving average crossing at 77.98.

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Crude Oil Rises in New York After U.S. Economy Grows More Than Expected

Crude oil rose for the first time in four days after a government report showed that the U.S. economy expanded at the fastest pace in six years, signaling demand may rise in the world’s biggest energy market. Oil climbed as much as 1.6 percent after the Commerce Department said U.S. gross domestic product grew by 5.7 percent in the fourth quarter, exceeding the median forecast of economists surveyed by Bloomberg News. It was the best performance since the third quarter of 2003. Oil has lost 6.9 percent in January, the first monthly decline since July.

“It’s a good GDP number, and frankly that’s what the market needed to see,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis. “If there are any doubters out there that the economy is not in recovery, this should quash that.” Crude oil for March delivery increased 71 cents, or 1 percent, to $74.35 a barrel at 10:10 a.m. on the New York Mercantile Exchange. Earlier, it touched $74.82.

Oil has fallen 12 percent since reaching a 15-month high of $83.95 a barrel on Jan. 11 amid concern the U.S. government will limit trading by banks and that China will take further steps to cool its economy. China is the fastest-growing energy market.
“We might have gotten more of a bounce off this GDP number if the Chinese weren’t raising the reserve requirements for the banks and slowing lending,” said Phil Flynn, vice president of research at PFGBest in Chicago.....Read the entire article.

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Phil Flynn: You Don’t Say

Sometimes is not about what you say, it's about what you do not say. In the big Fed statement yesterday, one lone rouge inflation hawk dared to stand up and say, Hey guys, it is our job to worry about inflation. The lack of a comment about the housing market left traders wondering whether it was a glaring omission or perhaps it was an admission to the fact that the Fed is under a lot of political pressure. The Fed also changed their wording on inflation prospects from inflation would remained subdued for some time to it "likely" would remained subdued.


Ah yes, the changing face of politics where everything remains the same. Obama tried to move to the right though overall, at times he seemed a bit contradictory. Obama tried to reach out to the energy sector by embracing drill, drill, drill, nuclear power and clean coal technology as long as we at same time have a lot of money for “big green”. Oh yes you have to take care of the "big green” lobby as they spent millions to put him in office and they expect billions of green dollars back in return. And don’t forget he also said he would repeal "tax breaks” for oil companies and give tax breaks to big green. The Robin Hood energy plan: take from the rich and then run the energy companies and then give their money to the poor inefficient green energy companies.

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Chevron Rakes in $3.1Billion, Earnings Down 37%

Chevron Corporation reported earnings of $3.07 billion ($1.53 per share-diluted) for the fourth quarter 2009, compared with $4.90 billion ($2.44 per share-diluted) in the fourth quarter 2008. Earnings in the 2008 quarter included a gain of approximately $600 million on an upstream asset exchange transaction. Foreign currency effects reduced earnings in the 2009 quarter by $67 million, compared with a benefit to income of $478 million a year earlier.

Full year 2009 earnings were $10.48 billion ($5.24 per share-diluted), down 56 percent from $23.93 billion ($11.67 per share-diluted) in 2008.

Sales and other operating revenues in the fourth quarter 2009 were $48 billion, compared with $43 billion in the year ago quarter. For the full year 2009, sales and other operating revenues were $167 billion, versus $265 billion in 2008. The decrease in the twelve month period was primarily due to lower prices for crude oil, natural gas and refined products.

"Earnings decreased in 2009 as a result of lower crude oil and natural gas prices and a decline in refined product sales margins, driven by a weak global economy," said Chevron’s Chairman and CEO, John Watson. "In this challenging environment, Chevron's successes in operational reliability and cost management made valuable contributions to our bottom line. Our financial strength enabled continued investment in our excellent portfolio of capital and exploratory projects and an increase in the annual dividend on our common shares for the 22nd consecutive year.....Read the entire article.


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Here's Your Crude Oil, Natural Gas and the U.S. Dollar Numbers For Friday Morning

Crude oil was higher overnight due to short covering as it consolidates some of this week's decline. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term.

If March extends this month's decline, December's low crossing at 72.45 is the next downside target. Closes above the 10 day moving average crossing at 75.73 are needed to confirm that a short term low has been posted.

Crude oil pivot point for Friday is 73.69

First resistance is the 10 day moving average crossing at 75.73
Second resistance is the 20 day moving average crossing at 78.80

First support is Wednesday's low crossing at 72.65
Second support is December's low crossing at 72.45

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Natural gas was higher due to short covering overnight as it consolidates some of this week's decline. Stochastics and the RSI are becoming oversold but remain bearish signaling that sideways to lower prices are possible near term.

If March extends this week's decline, the 75% retracement level of the December-January rally crossing at 4.919 is the next downside target. Closes above the 20 day moving average crossing at 5.564 would confirm that a short term low has been posted.

Natural gas pivot point for Friday is 5.152

First resistance is broken trading range support crossing at 5.327
Second resistance is the 10 day moving average crossing at 5.465

First support is Thursday's low crossing at 5.060
Second support is the 75% retracement level of the December-January rally crossing at 4.919

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The U.S. Dollar was slightly higher overnight as it extends this week's rally. Stochastics and the RSI are becoming overbought but remain bullish signaling that sideways to higher prices are possible near term.

If March extends this month's rally, the 38% retracement level of the 2009 decline crossing at 79.71 is the next upside target. Closes below the 20 day moving average crossing at 77.96 would confirm that a short term top has been posted.

First resistance is the overnight high crossing at 79.33
Second resistance is the 38% retracement level of the 2009 decline crossing at 79.71

First support is the 10 day moving average crossing at 78.44
Second support is the 20 day moving average crossing at 77.96



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Commodities Changed Little Despite Volatile Trading

Commodities move with great volatility but ended up with little changes Thursday. The benchmark contract for crude oil plunged to as low as 72.93 before recovering to 73.64, compare with Wednesday's close at 73.67. While heating oil price also closed almost flat gasoline slid -1.1% to 19.174 as higher than expect jobless claims data implied weaker gasoline consumption.

Initial jobless claims reduced to 470K in the week ended January 23, compared with an expected drop to 452K, from 482K a week ago. The 4 week average increased +10K to 456K while continuing claims dipped -57K to 4602K, the lowest level in a year. We believe the overall trend continues to suggest improvement in the job market, though at a pace slower than previously anticipated.

Headline of durable goods orders disappointed the market by recording only +0.3% mom in December after dropping -0.4% a month ago. However, the reading with transportations excluded showed a +0.9% increase on monthly basis. November's reading was also revised up slightly to +2.1%.

Strength in USD and JPY indicated investors gave up higher-yield investment and sought safe assets yesterday. This was probably a major reason for the softness in commodity prices. The euro slumped against the dollar and the yen as investors doubted if Greece can reduce its huge deficit without the help from outside. The 16 nationed single currency fell to a 6 month low against USD on concerns that the Greek problem will spread to other high deficit economies in Europe.....Read the entire article.

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Crude Oil Market Commentary For Thursday Evening

Crude oil closed slightly higher due to short covering on Thursday but remains below the 87% retracement level of the December-January rally crossing at 73.95. The high range close sets the stage for a steady to higher opening on Friday.

Stochastics and the RSI are oversold but remain neutral to bearish signal that sideways to lower prices are possible near term. If March extends today's decline, December's low crossing at 72.45 is the next downside target. Closes above the 20 day moving average crossing at 79.11 are needed to confirm that a short term low has been posted.

Crude oil pivot point for Thursday evening is 73.77

First resistance is the 10 day moving average crossing at 76.33
Second resistance is the 20 day moving average crossing at 79.11

First support is Wednesday's low crossing at 72.65
Second support is December's low crossing at 72.45

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Natural gas closed lower on Thursday and tested the 62% retracement level of the December-January rally crossing at 5.114. The mid range close sets the stage for a steady opening on Friday. Stochastics and the RSI have turned bearish signaling that sideways to lower prices are possible near term.

If March extends this week's decline, the 75% retracement level of the December-January rally crossing at 4.919 is the next downside target. Closes above the 20 day moving average crossing at 5.589 are needed to confirm that a low has been posted.

Thursday evenings natural gas pivot point is 5.166

First resistance is broken trading range support crossing at 5.327
Second resistance is the 10 day moving average crossing at 5.504

First support is today's low crossing at 5.060
Second support is the 75% retracement level of the December-January rally crossing at 4.919

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

If March extends this month's rally, the 38% retracement level of the 2009-2010 decline crossing at 79.71 is the next upside target. Closes below the 20 day moving average crossing at 77.91 would confirm that a short term top has been posted.

First resistance is today's high crossing at 79.27
Second resistance is the 38% retracement level of the 2009-2010 decline crossing at 79.71

First support is the 10 day moving average crossing at 78.27
Second support is the 20 day moving average crossing at 77.91

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Bloomberg Technical Analysis: Crude Oil Set to Rebound to $79.50 a Barrel

Oil may rise to $79.50 a barrel after holding above its 200 day moving average, according to a technical analysis by Lind-Waldock & Co. in Chicago.

Prices will probably “bounce” next week after March oil futures dropped for 10 of the past 12 sessions without sliding below support at the 200 day level, said Richard Ilczyszyn, a senior market strategist with Lind-Waldock, a division of MF Global Ltd. Oil dropped $1.04, or 1.4 percent, to $73.67 yesterday, the lowest settlement since Dec. 21.

“The 200 day moving average held, which is a sign that prices are headed back up,” Ilczyszyn said in a telephone interview.

The contract will next hit resistance at the 50 day and 21 day moving averages, which were $78.33 and $79.41, respectively, yesterday, Ilczyszyn said.

“If the market closes below $72, there is going to be a big flood,” Ilczyszyn said. “There would be repercussions across the board and we would see big drops in both gasoline and heating oil.”

A settlement below $72, which last occurred on Oct. 7 on the New York Mercantile Exchange, would be a signal for the contract to test $67.99, the price on Sept. 25, he said.

For more energy stories Check Out Bloomberg.Com

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