Crude Falls as Chinese Growth Is Seen Slowing, Storm Avoids Gulf Platforms

Crude oil fell the most in more than three weeks amid concern that China’s economy is growing at a slower pace than estimated and forecasts that a tropical storm in the Gulf of Mexico will miss oil producing areas. Oil lost as much as 3.4 percent after the Conference Board corrected its April gauge for the outlook on China’s economy, saying it rose by the smallest amount since November. Tropical Storm Alex make landfall in Mexico July 1 as a hurricane, according to the U.S. National Hurricane Center in Miami.

“It’s been our thesis that China was going to slow and oil was overpriced as a result,” said Addison Armstrong, director of market research at Tradition Energy, a Stamford, Connecticut based procurement adviser. “In the current forecast, it appears the storm is a non event in terms of damage to the Gulf of Mexico.”

Oil for August delivery fell $2.47, or 3.2 percent, to $75.78 a barrel at 9:07 a.m. on the New York Mercantile Exchange. Earlier, crude touched $75.63 a barrel in the biggest one day drop since June 4. It has dropped 4.5 percent this year and 9.5 percent this quarter. Oil also declined as equity markets dropped and the dollar strengthened against the euro, curbing the appeal of commodities as an alternative investment.

Reporter Margot Habiby can be reached at mhabiby@bloomberg.net.


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Crude Oil Bears Take Monday, But are Signals Turning Neutral to Bullish?

Crude oil closed lower due to profit taking on Monday as it consolidated some of last Friday's rally. The low range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI are turning neutral to bullish signaling that sideways to higher prices are possible near term. If August renews the rally off May's low, the 62% retracement level of last month's decline crossing at 81.13 is the next upside target. Closes below last week's low crossing at 75.17 would confirm that a short term top has been posted. First resistance is today's high crossing at 79.38. Second resistance is last Monday's high crossing at 79.94. First support is the 20 day moving average crossing at 76.30. Second support is last Wednesday's low crossing at 75.17.

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Natural gas closed lower on Monday as it extended this month's decline. The low range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI remain bearish signaling that additional weakness is possible near term. Closes below last Tuesday's low crossing at 4.727 would confirm that a short term top has been posted. Closes above the 10 day moving average crossing at 4.952 would temper the near term bearish outlook. First resistance is the 10 day moving average crossing at 4.952. Second resistance is the reaction high crossing at 5.249. First support is last Tuesday's low crossing at 4.727. Second support is the reaction low crossing at 4.687.

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The U.S. Dollar closed higher on Monday as it consolidates around the 25% retracement level of the November-June rally crossing at 85.71. The high range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI are turning bearish hinting that additional weakness is possible near term. If September renews this month's decline, the 38% retracement level of the November-June rally crossing at 83.83 is the next downside target. Closes above the 20 day moving average crossing at 87.01 would confirm that a short term low has been posted. First resistance is last Wednesday's high crossing at 86.71. Second resistance is the 20 day moving average crossing at 87.01. First support is last Monday's low crossing at 85.36. Second support is the 38% retracement level of the November-June rally crossing at 83.83.

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Gold posted a key reversal down due to profit taking on Monday and the low range close sets the stage for a steady to lower opening on Tuesday. August gold pulled back from a fresh record high today after the rally lost momentum and a stronger dollar pressured the market. Stochastics and the RSI are diverging and are turning neutral hinting that a short term top might be in or is near. Closes below the 20 day moving average crossing at 1235.00 are needed to confirm that a short term top has been posted. If August renews this year's rally into uncharted territory, upside targets will now be hard to project. First resistance is last Monday's high crossing at 1266.50. First support is the 20-day moving average crossing at 1235.00. Second support is last Thursday's low crossing at 1225.20.

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Phil Flynn: Dodge A Bullet

Tropical storm Alex most likely won’t be much of a problem for BP as its track is far south of the spill zone. Now let’s just hope that another storm does not develop. A second tropical wave dissipated and that is good news as it appears that BP may have dodged a bullet and can continue to collect oil and make progress on moving forward with the relief well.

The Wall Street Journal reports that BP said it recovered 22,750 barrels of oil on Saturday yet at the same time they do not expect to complete the relief well until early August. The question is will it work. The Financial Times says that the operation has no precedent at the depth that BP is operating, but a review of similar efforts in shallower waters and the opinion of geologists and petroleum engineers point to a discomforting possibility: the relief well might not work on the first try, leaving open the risk of delays. Delays that could turn out to be worst as hot air in the Atlantic could produce more storms.

Speaking of hot air, the G-20 met over the weekend and the world’s 20 most wealthy nations and their commitment to debt reduction and banking reform may have more influence over oil than the weather. The G-20 said that they plan to follow through on fiscal stimulus and communicating “growth friendly” fiscal consolidation plans for advanced countries that will be implemented going forward. The G-20 says that sound fiscal finances are essential to sustain recovery, provide flexibility to respond to new shocks, ensure the capacity to meet the challenges of aging populations, and avoid leaving future generations with a legacy of deficits and debt. The path of adjustment must be carefully calibrated to sustain the recovery in private demand.

They will commit to reducing debt. The G-20 said that there is a risk that synchronized fiscal adjustment across several major economies could adversely impact the recovery. There is also a risk that the failure to implement consolidation where necessary would undermine confidence and hamper growth. Reflecting this balance, advanced economies have committed to fiscal plans that will at least halve deficits by 2013 and stabilize or reduce government debt-to-GDP ratios by 2016. For the crude oil market the impact from the G-20 is apparent.

It will have as much impact on oil as it does on the euro and the dollar. Oil broke when the dollar broke and the euro rallied leaving it clear today where oil will take its marching orders from. Watch the currencies for the oil direction. And since the currency action will probably be light, it should be a good day to buy the breaks and sell the rallies.

Phil can be reached @ pflynn@pfgbest.com and make sure to catch him every day on the Fox Business Network

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Crude Oil and Natural Gas Commentary For Monday Morning

Crude oil was lower due to profit taking overnight as it consolidates some of last Friday's rally. Stochastics and the RSI are neutral to bearish signaling that sideways to lower prices are possible near term.

Closes below last Wednesday's low crossing at 75.17 are needed to confirm that a short term top has been posted. If August renews the rally off May's low, the 62% retracement level of May's decline crossing at 82.67 is the next upside target.

First resistance is the overnight high crossing at 79.38
Second resistance is last Monday's high crossing at 79.94

Crude oil pivot point for Monday is 77.98

First support is the 20 day moving average crossing at 76.30
Second support is last Wednesday's low crossing at 75.17

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Natural gas was lower overnight as it extends last week's trading range. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term.

Closes below last Tuesday's low crossing at 4.727 are needed to confirm that a short term top has been posted and would open the door for a larger degree decline near term. Closes above the 10 day moving average crossing at 4.963 would temper the near term bearish outlook in the market.

First resistance is the 10 day moving average crossing at 4.963
Second resistance is the reaction high crossing at 5.249

Monday's pivot point for natural gas is 4.875

First support is last Tuesday's low crossing at 4.727
Second support is the reaction low crossing at 4.687

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Caribbean Storms Strengthen, May Head for Oil Spill

Tropical Storm Alex, the first named storm of the Atlantic hurricane season, moved across Mexico’s Yucatan Peninsula today on a track that would keep it far west and south of the largest oil spill in U.S. history. The storm was forecast to enter the Gulf of Mexico later today and regain whatever strength it lost while over land. The U.S. National Hurricane Center storm track predicts Alex will then curve west toward Mexico City rather than north and east into the worst of the BP Plc oil spill.

“Odds are it is not an issue for the cleanup,” Tom Kines, a meteorologist with AccuWeather Inc., said in a telephone interview today. He said the storm is likely to intensify to a Category 1 hurricane on the five step Saffir-Simpson scale before making its final landfall near Tampico on June 30. Alex, with sustained winds of 40 miles (65 kilometers) per hour, was about 105 miles west of Chetumal and moving west northwest at 12 mph, according to the 8 a.m. advisory from the Miami based center. A tropical storm warning for the coast of Belize and the Yucatan Peninsula’s east coast likely will be discontinued today, it said.

“Some weakening is expected while over land and Alex could become a tropical depression,” the advisory said. The storm is expected to regain strength when it emerges over the southern Gulf of Mexico this afternoon.....Read the entire article.

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Crude Oil Weekly Technical Outlook For Saturday June 26th

Crude oil's retreat was shallow and was contained 75.17. Subsequent rally indicates that rise from 64.23 is not over yet and has resumed. Initial bias remains on the upside and further rise should be seen to 80.53 next. Break will target a retest on 87.15 high. On the downside, though, break of 75.17 will argue that rebound from 64.23 is completed and will turn bias back to the downside for 69.51 support first.

In the bigger picture, the stronger than expected rebound from 64.24 dampened our bearish view and we'll stay neutral first. But still, rise from 64.24 looks corrective in nature and favors another fall after completion. A break of 69.51 support will indicate that rebound from 64.24 is finished and revive the bearish case. That is, whole medium term rise from 33.2 is finished at 87.15, just ahead of 50% retracement of 147.27 to 33.2 at 90.24. In such case, we'd see another fall to 50% retracement of 33.2 to 87.15 at 60.18 at least.

In the long term picture, current development suggests that rebound from 33.2 is finished at 87.15, inside 76.77/90.24 fibo resistance zone as expected. Our view is that fall fro 87.15 would develop into the third falling leg of the whole correction from 147.27 and hence, we'd anticipate an eventual break of 33.2 low in the long term as such correction extends.....Nymex Crude Oil Continuous Contract 4 Hours Chart.

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New Video: Do You Know About Market Divergences?

In the market there are two types of market divergences that can occur....a bullish divergence and a bearish divergence. Both of these divergences are important and you need to know how they work and how you can benefit from this knowledge.

In this short educational trading video, we will show you the tools we use to spot market divergences. We will be using the Relative Strength Indicator (RSI) and the Moving Average Convergence Divergence indicator (MACD) which was developed by our friend Gerald Appel.

As always our videos are free to watch and there are no registration requirements. Please feel free to leave a comment on this or any of our other videos.


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Phil Flynn: Pricing In Mediocrity

Global oil markets are finding it hard to get excited living in this new post Federal Reserve World. The passion left the market place and sunk in to a kind of what might be described as a stag deflation mode. All across the yield curve, from the short end to the long, yields are sinking to near record lows. While cheap money is keeping our economy meandering along, it is not the type of drive that seems to be the type of growth that will translate into strong energy demand. What’s more, even stories that are normally bullish for oil and the products are not giving the market the support you would expect.

For example the Chinese allowed their currency, the yuan renimbi, to rise to what is called the highest level in the modern era. The Wall Street Journal reported that on the over the counter market, the dollar was at CNY6.7900 around 0930 GMT, down from Thursday's close of CNY6.7997. It traded between CNY6.7856 and NY6.7977. The low end of the range was below the previous modern-era intraday low of NY6.7958, set Monday. The yuan is up 0.53% this week. Yet not even what many thought would be a bullish move for oil has given us much play. In fact oil lost ground on the announcement.Now some say that is because the move by the Chinese was only a.....Read the entire article.

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Crude Oil Advances on Concern Storm May Disrupt Gulf of Mexico Production

Crude oil rose the most in two weeks in New York on concern the first tropical storm of the hurricane season may form and disrupt production in the Gulf of Mexico. The gain accelerated as the dollar weakened against the euro. Oil climbed as much as 3.4 percent after the National Hurricane Center said that a low pressure area located in the Caribbean off Honduras and Grand Cayman has a 70 percent chance of developing into a tropical cyclone this weekend and may head into the Gulf.

“We always see knee jerk reactions when storms enter the Gulf, and there are concerns that storms will damage either offshore or onshore infrastructure,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. Crude for August delivery gained $2.12, or 2.8 percent, to $78.63 a barrel at 1:14 p.m. on the New York Mercantile Exchange, the biggest percentage gain since June 9. Oil rose as high as $79.11. The contract has increased 0.5 percent this week.

The euro was up 0.2 percent at $1.2355 at 1:17 p.m., after falling as low as 1.2254. A lower U.S. currency versus the euro bolsters the appeal of crude as an alternative investment. “The dollar is weakening and it seemed to give crude a little boost,” said Phil Flynn, vice president of research at PFGBest in Chicago. The low pressure area is likely to become a tropical depression before it reaches the Yucatan Peninsula, and the system may become a tropical cyclone during the next 48 hours, the hurricane center said at 8 a.m. Miami time today.

About 31 percent, or 1.69 million barrels a day, of U.S. oil production comes from federal waters in the Gulf of Mexico, according to the Energy Department.....Read the entire article.

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Crude Oil Bears Take a Clear Near Term Advantage

Crude oil was slightly lower overnight as it extends this week's decline. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term.

Closes below Wednesday's low crossing at 75.17 are needed to confirm that a short term top has been posted. If August renews the rally off May's low, the 62% retracement level of May's decline crossing at 82.67 is the next upside target.

First resistance is the 10 day moving average crossing at 77.48
Second resistance is Monday's high crossing at 79.94

Crude oil pivot point for Friday is 76.13

First support is the 20 day moving average crossing at 76.03
Second support is Wednesday's low crossing at 75.17

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Natural gas was lower overnight and trading below the 20 day moving average crossing at 4.779. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term.

Closes below Tuesday's low crossing at 4.756 are needed to confirm that a short term top has been posted and would open the door for a larger degree decline near term. Closes above the 10 day moving average crossing at 4.926 would temper the near term bearish outlook in the market.

First resistance is the 10 day moving average crossing at 4.926

Friday's pivot point for natural gas is 4.767

Second resistance is last Wednesday's high crossing at 5.196
First support is Tuesday's low crossing at 4.756
Second support is the reaction low crossing at 4.628

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