Crude Oil Falls First Day in Three on Slowing Growth in China

Crude oil fell for the first day in three on concern growth will slow in China, cutting fuel demand in the world’s second largest energy user. Oil gave up some of yesterday’s 2.4 percent gain on speculation Chinese demand will slow as policymakers trim economic stimulus after the $1.4 trillion lending binge that revived growth in 2009. Crude supplies at Cushing, Oklahoma, where New York traded West Texas Intermediate oil is delivered, rose last week, the Energy Information Administration said.

“The mood is still cautious,” said Toby Hassall, a commodity analyst at CWA Global Markets Pty in Sydney. “The numbers from the EIA were not unexpected in terms of the seasonal pattern. There is still caution in the marketplace.” Crude oil for July delivery dropped as much as 42 cents, or 0.6 percent, to $74.19 a barrel, in electronic trading on the New York Mercantile Exchange. It was at $74.31 at 10:33 a.m. Singapore time. Yesterday, the contract rose $1.75 to settle at $74.61. Futures are poised for a 0.4 percent gain for the week, the second consecutive weekly increase.

“Sentiment is still very fragile,” David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney, said by telephone today. “Inventories are still high. There are some signs of improvement but it’s certainly not a tight market at this stage”....Read the entire article.

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Video: Crude Oil and Natural Gas Inventories Slide

Oil inventories declined greater than expected, with CNBC's Sharon Epperson and Chris Motroni, Heritage Energy.




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Crude Oil, Natural Gas, Gold and Dollar Commentary For Thursday Evening

Crude oil closed higher on Thursday as it extends the rebound off May's low. The high range close sets the stage for a steady to higher opening on Friday. Stochastics and the RSI are neutral to bullish signaling that sideways to higher prices are possible near term. Closes above the 20 day moving average crossing at 74.60 are needed to confirm that a short term low has been posted. If July renews the decline off May's high, last July's low crossing at 66.11 is the next downside target. First resistance is the 20 day moving average crossing at 74.60. Second resistance is last Friday's high crossing at 75.72. First support is the 10 day moving average crossing at 71.97. Second support is last Tuesday's low crossing at 67.15.

Natural gas closed higher on Thursday and closed above the upper boundary of the April-May trading range crossing at 4.433. The high range close sets the stage for a steady to higher opening on Friday. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near term. If July extends this week's rally, the 38% retracement level of the November-May decline crossing at 4.872 is the next upside target. Closes below the 10 day moving average crossing at 4.264 would confirm that a short term top has been posted. First resistance is today's high crossing at 4.703. Second resistance is the 38% retracement level of the November-May decline crossing at 4.872. First support is Wednesday's low crossing at 4.217. Second support is the reaction low crossing at 3.971.

The U.S. Dollar closed higher on Thursday as it extends the consolidation pattern of the past two weeks. The high range close sets the stage for a steady to higher opening on Friday. Stochastics and the RSI are diverging but are turning neutral to bullish signaling that sideways to higher prices possible near term. If June renews this year's rally, the 87% retracement level of 2009's decline on the weekly continuation chart crossing at 87.79 is the next upside target. Closes below the reaction low crossing at 85.33 are needed to confirm that a short term top has been posted. First resistance is the reaction high crossing at 87.63. Second resistance is weekly resistance crossing at 87.79. First support is the 20 day moving average crossing at 86.12. Second support is the reaction low crossing at 85.33.

Gold closed lower due to profit taking on Thursday. The low range close sets the stage for a steady to lower opening on Friday. Stochastics and the RSI are neutral to bullish signaling that sideways to higher prices are possible near term. If August extends this week's rally, May's high crossing at 1251.40 is the next upside target. First resistance is Tuesday's high crossing at 1230.60. Second resistance is May's high crossing at 1251.40. First support is the 10 day moving average crossing at 1206.70. Second support is the reaction low crossing at 1168.00.

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Phil Flynn: Oil Prices Rise On Leaked Information

That is right! The jobs report was leaked causing a rally in the stock market! Who got their hands on this valuable inside information and leaked it to the marketplace at large? Well believe it or not it was Obama himself. What!? I know! Yet that is exactly what he did. Speaking at Carnegie Mellon University in Pittsburgh, the President said, “After losing an average of 750,000 jobs a month during the winter of last year, we have now added jobs for five of the last six months, and we expect to see strong job growth in Friday's report.” Ah ha!!!

Do you think he knows something? Now that is just one day after the Vice President Joe Biden said that the upcoming May employment report would show a much larger number of jobs created than in the previous month, when 290,000 jobs were added. Do you think he knows something? Ok, silly question. But of course the market took the President seriously anyway helping to drive stocks and the oil market higher.Why oil? Well based on improving US demand expectations on better US jobs outlook we might actually consume more oil.

That thought was enforced by some pretty strong auto sales data. It seems that in the Month of May while the stock market was tanking auto sales were soaring! Maybe some people were taking their stock profits to buy new cars. Ford, GM and Chrysler all saw double digit sales gains over May of a year ago according to the AP. The AP reported, “May marked the seventh straight month of year-over-year sales increases for the auto industry. Ford Motor Co., General Motors Co., and Chrysler Group L.L.C. saw double digit sales gains over the same month last year, when GM was headed into bankruptcy, joining Chrysler”.....Read the entire article.

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Are Gulf Oil Disaster Stocks Way Oversold?

Goldman Sachs Daniel Boyd feels the market sell down for offshore drillers is overdone.

Goldman:
Investor fears related to the six month moratorium on deepwater drilling in the US Gulf are overdone from a fundamental perspective, in our view as this represents just 3%-5% of annual revenues for the major companies. We ultimately expect the financial impact to be minimal (3%-7% of EPS in 2010 and we are slightly lowering our estimates to reflect this) and temporary given not only the importance of DW to US oil supply but that many of the rigs will move to international locations where there are current shortages.

They're approaching the trough valuations they hit when the world was ending in early 2009:

Here's a stock-by-stock breakdown of the price to book valuations:

Look for 2Q earnings as a positive catalyst:

With P/B and EV/GCI at “reasonable” trough levels, we recommend longer-term investors buy the group now though recognize that short-term investors might prefer to wait until either the oil spill is contained, which will give more confidence that the DW drilling ban will be lifted in six months, or 2Q results which we expect to confirm our view that global fundamentals will remain strong.

Mr. Boyd is also particularly bullish on another gulf disaster stock, outside of the drillers, Halliburton

(HAL)

We maintain our Buy rating on Halliburton. We think that the shares are now discounting trough assumptions given that it is trading at just an average historical multiple of the actual 1Q2010 trough in earnings.

Perhaps these are the smarter BP-disaster plays, the stocks which have fallen hard along with BP due to the gulf disaster, but aren't nearly as exposed to the ballooning potential liabilities.

From Vincent Fernando at The Business Insider

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The World’s Biggest LNG Producer Holding Onto it’s Gas

On paper, it should be a perfect match. Qatar has huge amounts of gas to export and its neighbours are desperately prowling for reliable energy supplies to power their emerging economies. But Qatar’s recent decision to rule out significant gas exports to its allies in the Gulf Cooperation Council from a huge gas project inaugurated earlier this month illustrates just how acute the gas needs are among some of the globe’s biggest oil producers.

The new Qatari jewel is the second phase of Al-Khaleej Gas, which is now producing about 1.25 billion cubic feet a day, equivalent to about 17% of the country’s production. Combined with AKG-1, the two projects account for more than a quarter of the country’s overall output. (Most of the remainder is liquefied and exported around the world.)

Qatar’s deputy prime minister and energy minister, Abdullah al-Attiyah, recently said that all of the gas production from AKG-2 would be used to meet domestic demand, especially for electricity generation, and to continue feeding the relentless double-digit economic growth of the past few years.

Qatar is already the world’s biggest LNG producer. It’s also a growing player in gas to liquids. But over the next decades, the country’s domestic gas demand is expected to double. And that increased gas demand can be seen throughout the region as oil rich countries work to grow their economies, especially for petrochemical and industrial sectors, as well as domestic desalination and electricity demand.

Regional electricity demand is expected to increase annually by more than 6% and it is already competing with gas demand from petrochemical plants, with countries like Kuwait forced to prioritize power over industrial output.....Read the entire article.

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Crude Oil Daily Technical Outlook For Thursday Morning

Intraday bias in crude oil remains neutral as sideway trading continues between 71.23 and 75.72. Break of 71.23 minor support will indicate that rebound from 64.23 is finished and will flip intraday bias back to the downside for retesting this low first. On the upside, above 75.72 will bring another rise, but after all, upside should be limited by 61.8% retracement of 87.15 to 64.23 at 78.39 and bring fall resumption.

In the bigger picture, prior break of 68.59/69.50 support zone affirms our view that whole medium term rebound from 33.2 has completed at 87.15 already, just ahead of 50% retracement of 147.27 to 33.2 at 90.24. Further decline should be seen to 50% retracement of 33.2 to 87.15 at 60.18 at least. Also, as rebound from 33.2 is viewed as as a correction to the whole correction that started at 2008 at 147.27, we'd anticipate a break of 33.2 low in the longer term. On the upside, break of resistance at 78 level is needed to be indicate that fall from 87.15 is completed. Otherwise, we'll stay bearish.....Nymex Crude Oil Continuous Contract 4 Hours Chart.

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Crude Oil Rises a Second Day on U.S. Home Sales Growth, Crude Stockpile Decline

Oil gained for a second day in New York after U.S. home sales rose and an industry funded report showed a decline in the country’s gasoline inventories, bolstering optimism that the economic recovery will accelerate. Oil advanced as the Standard & Poor’s 500 Index climbed after pending sales of existing homes rose to the highest level since October.

The American Petroleum Institute said last week’s gasoline supplies fell to the lowest this year. “The flow of data from the U.S. is still on the positive side, suggesting recovery,” said Toby Hassall, commodity analyst at CWA Global Markets Pty in Sydney. “If we start to see inventories decline in line with their seasonal pattern then that should offer support to the market.”

Crude oil for July delivery increased as much as $1.03, or 1.4 percent, to $73.89 a barrel in electronic trading on the New York Mercantile Exchange, and was at $73.77 at 1:36 p.m. Singapore time. Yesterday, the contract rose 28 cents, or 0.4 percent, to settle at $72.86. The S&P 500 increased 2.6 percent yesterday. That has pushed Asia stocks higher today with the MSCI Asia Pacific Index climbing the most since February. The index of pending U.S. home sales gained 6 percent after they were projected to rise 5 percent in April, according to the median of 40 forecasts in the Bloomberg survey.

“The economic numbers out of the U.S. have been improving gradually this month,” said Serene Lim, an energy commodity strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “Yesterday’s API data was quite encouraging. We’ll have to see if the Department of Energy numbers match that, especially if the Cushing inventories fall”....Read the entire article.

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Crude Oil Bulls Gain Momentum on High Range Close

Crude oil closed higher due to short covering on Wednesday ending a two day correction off last Friday's high. The high range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI are neutral to bullish signaling that sideways to higher prices are possible near term. Closes above the 20 day moving average crossing at 75.05 are needed to confirm that a short term low has been posted. If July renews the decline off May's high, last July's low crossing at 66.11 is the next downside target. First resistance is the 20 day moving average crossing at 75.05. Second resistance is last Friday's high crossing at 75.72. First support is the 10 day moving average crossing at 71.82. Second support is last Tuesday's low crossing at 67.15.

Natural gas closed higher on Wednesday as it extends the rally off last week's low. The high range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near term. If July extends this week's rally, May's high crossing at 4.587 is the next upside target. If July renews the decline off May's high, the reaction low crossing at 3.971 is the next downside target. First resistance is today's high crossing at 4.440. Second resistance is May's high crossing at 4.587. First support is last Tuesday's low crossing at 4.036. Second support is the reaction low crossing at 3.971.

The U.S. Dollar closed higher on Wednesday but the mid-range close sets the stage for a steady opening on Thursday. Stochastics and the RSI are diverging but are neutral to bearish signaling that sideways trading is possible near term. If June renews this year's rally, the 87% retracement level of 2009's decline on the weekly continuation chart crossing at 87.79 is the next upside target. Closes below the reaction low crossing at 85.33 are needed to confirm that a short term top has been posted. First resistance is the reaction high crossing at 87.63. Second resistance is weekly resistance crossing at 87.79. First support is the 20 day moving average crossing at 86.01. Second support is the reaction low crossing at 85.33.

Gold closed lower due to profit taking on Wednesday. The high range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near term. If August extends this week's rally, May's high crossing at 1251.40 is the next upside target. First resistance is Tuesday's high crossing at 1230.60. Second resistance is May's high crossing at 1251.40. First support is the 20 day moving average crossing at 1210.80. Second support is the 10 day moving average crossing at 1205.40.



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