Crude Oil Contango Doubles in 2011 Recovery Betting With Frontline Ship Demand

Crude oil traders are showing increasing confidence that U.S. economic growth will rebound next year as they take advantage of the widening gap between current prices of crude and contracts for delivery six months from now. The price advantage, or contango, to buy and hold crude more than doubled to $5.76 a barrel last month from $2.60 at the end of July, as contracts for October delivery fell 9.4 percent and March dropped 5.3 percent. ConocoPhillips hired the tanker TI Europe for storage in the Gulf of Mexico, according to data on the website of RS Platou A/S, an Oslo based shipbroker.

Crude, gasoline and heating oil inventories reached a 20 year high last month as the U.S. Commerce Department said the economy probably expanded at a 1.6 percent annual pace in the second quarter from an initially reported 2.4 percent. The gap, or curve, between the price of oil for immediate delivery and for March has increased to a three month high, making storage a profitable wager on an American rebound next year.

“Demand is going to look a lot better in 2011,” said Adam Sieminski, chief energy economist at Deutsche Bank AG in Washington, who predicted prices will rise to $80 next year. “By then the overall numbers on things like industrial production, housing, investment and probably even consumer sentiment will be better.” October futures rose 63 cents, or 0.9 percent, to $74.72 a barrel at 10:05 a.m. on the New York Mercantile Exchange. The March contract rose 6 cents to $80.35. The spread narrowed by 7.5 percent to $5.63.....Read the entire article.


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Crude Oil Daily Technical Outlook Wednesday Morning

Crude oil was lower overnight as it consolidates some of the rally off August's low. Stochastics and the RSI remain neutral to bullish signaling that sideways to higher prices are possible near term.

Closes above the reaction high crossing at 75.58 are needed to confirm that a short term low has been posted. If October renews the decline off August's high, May's low crossing at 70.35 is the next downside target.

First resistance is the 20 day moving average crossing at 74.52
Second resistance is the reaction high crossing at 75.58

Crude oil pivot point for Wednesday morning is 73.78

First support is the reaction low crossing at 70.76
Second support is May's low crossing at 70.35

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What is Our Smart Scan Tool Telling Us About Natural Gas?

With retail traders anxious to find a bottom in natural gas prices, let's take a look at what our trading tols are telling us about natural gas ETF UNG.

"Smart Scan Chart Analysis" is showing some near term rallying power. However, this market remains in the confines of a longer term downtrend that should be traded with extremely tight money management stops.

Based on a pre defined weighted trend formula for chart analysis, UNG scored -75 on a scale from -100 (strong downtrend) to +100 (strong uptrend):

+10....Last Hour Close Above 5 Hour Moving Avg
+15....New 3 Day High on Friday
-20....Last Price Below 20 Day Moving Avg
-25....New 3 Week Low,Week Ending Sept 4th
-30....New 3 Month Low in September
-75....Total Score




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Bertha Coombs: Where is Crude Oil and Gold Headed on Wednesday?

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




The "Super Cycle" in Gold and How It Will Affect Your Pocketbook in 2010

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Markets Close Lower, Bulls Maintain The Advantage For Wednesday Morning

The S&P 500 index closed lower due to profit taking on Tuesday as it consolidates some of last week's rally. The low range close sets the stage for a steady to lower opening on Wednesday. Stochastics and the RSI remain bullish signaling that additional gains are possible near term. If September extends last week's rally, August's high crossing at 1127.50 is the next upside target. Closes below the 10 day moving average crossing at 1067.21 would confirm that a short term top has been posted. First resistance is today's high crossing at 1107.10. Second resistance is August's high crossing at 1127.50. First support is the 20 day moving average crossing at 1074.61. Second support is the 10 day moving average crossing at 1067.21.

Crude oil closed lower on Tuesday due to profit taking but remains above the 10 day moving average crossing at 73.66. The mid range close sets the stage for a steady opening on Wednesday. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term. Closes above the reaction high crossing at 75.58 are needed to confirm that a short term low has been posted. If October renews the decline off August's high, May's low crossing at 70.35 is the next downside target. First resistance is the 20 day moving average crossing at 74.85. Second resistance is the reaction high crossing at 75.58. First support is August's low crossing at 70.76. Second support is May's low crossing at 70.35.

Natural gas posted an inside day with a lower close on Tuesday but remains above the 10 day moving average crossing at 3.844. The mid range close sets the stage for a steady opening on Wednesday. Stochastics and the RSI are turning bullish hinting that a short covering rebound is possible near term. Closes above the 20 day moving average crossing at 4.048 are needed to confirm that a short term low has been posted. If October renews this year's decline, weekly support crossing at 3.225 is the next downside target. First resistance is last Friday's high crossing at 3.946. Second resistance is the 20 day moving average crossing at 4.048. First support is August's low crossing at 3.697. Second support is weekly support crossing at 3.225.

Gold closed higher on Tuesday and above the 87% retracement level of the June-July decline crossing at 1253.30 as it extends the rally off July's low. Stochastics and the RSI are overbought, diverging but are neutral to bullish signaling that sideways to higher prices are possible near term. If August extends the rally off July's low, June's high crossing at 1267.10 is the next upside target. Closes below the 20 day moving average crossing at 1234.40 are needed to confirm that a short term top has been posted. First resistance is today's high crossing at 1260.30. Second resistance is June's high crossing at 1267.10. First support is the 10 day moving average crossing at 1245.60. Second support is the 20 day moving average crossing at 1234.40.

The U.S. Dollar gapped up and closed higher on Tuesday as it consolidated some of the decline off August's high. The high range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI remain neutral to bearish signaling that sideways to lower prices are possible near term. If December extends last week's decline, August's low crossing at 80.75 is the next downside target. If December renews the rally off August's low, the reaction high crossing at 84.94 is the next upside target. First resistance is today's high crossing at 83.29. Second resistance is August's high crossing at 83.96. First support is last Friday's low crossing at 82.23. Second support is August's low crossing at 80.75.

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Crude Oil Falls for Second Day as Dollar's Gain Dims Appeal of Commodities

Crude oil fell the most in a week as the euro tumbled against the dollar on speculation that Europe’s debt crisis may worsen. Oil dropped as much as 2.6 percent after German factory orders unexpectedly declined in July, causing the euro to weaken the most since Aug. 11. Equities declined, ending the Standard & Poor’s 500 Index’s longest winning streak since July, on concern the European situation will delay the global economic recovery.

“The euro’s broken down and the dollar’s gotten stronger,” said Tom Bentz, a broker with BNP Paribas Commodity Futures Inc. in New York. “That’s helping to put some pressure on oil.” Crude for October delivery lost 60 cents, or 0.8 percent, to $74 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Earlier, it touched $72.63 a barrel, the biggest single day decrease since Aug. 31. Prices have dropped 6.8 percent this year.

U.S. oil markets were closed yesterday for the Labor Day holiday. Yesterday’s electronic transactions will be booked with today’s trades for settlement purposes. The euro fell 1.3 percent against the dollar to $1.2707 from $1.2876 yesterday, curbing the appeal of commodities as an alternative investment. The euro has declined 1.5 percent since Sept. 3. The S&P 500 lost 0.8 percent to 1,096.24, snapping a four day rally. The Dow Jones Industrial Average fell 72.73 points, or 0.7 percent, to 10,375.20.

Read the entire article and Watch Credit Suisse's Edward Morse Interview.

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Daryl Guppy: Crude Oil Turns Bearish, $54 May Be Downside Target

From guest blogger Daryl Guppy....

As recently as three weeks ago we remained bullish on oil. This view has now changed with a confirmation of a longer term chart pattern. Nymex oil is now showing a bearish pattern. There are still additional moves required to fully confirm the pattern but the development of bearish pressure is increasing. The behavior of oil in 2009 to 2010 has been dominated by two features. The first is the residual power of the historical support and resistance levels. The most important of these are between $78 and $88. The three recent tests near resistance at $88 created a bullish outlook with a potential to breakout and move to the next resistance level near $98.

The second feature was the development first of an up sloping trend channel. The lower edge of this channel was broken in May and a new lower parallel up trend channel developed. This lower channel has recently also been broken. It is the pattern of these breaks that point the way to a head and shoulder pattern. The rapid fall from $80.00 and the failure of the rebound is initial confirmation of the head and shoulder trend reversal pattern. If fully completed, it would put a downside target for oil near $54.

The pattern is confirmed in two ways. First when the price fails to rally above $81, which is the height of the right shoulder. This failure confirms the development of the right shoulder of the pattern. The second confirmation is a move below $65.00. This is the current projection value of the neckline in the head and shoulder pattern. Move below this level is final confirmation of the head and shoulder pattern.

Another confirmation, albiet minor, is a sustained close below historical support near $68. This has been a string support area since December 2009 and a major feature in the 2010 oil market behaviour. The development of the right shoulder has moved the NYMEX oil market out of the slightly bullish sideways consolidation band and into bearish territory. Traders use more caution in the long side of this market and are more aggressive in talking the short side.

Daryl Guppy is a trader and author of Trend Trading, The 36 Strategies of the Chinese for Financial Traders Guppy Traders.Com

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Phil Flynn: Demand Jam

According to the Energy Information Agency heading into the Labor Day holiday weekend, U.S. retail gasoline prices fell three in a row with an average price of $2.68 per gallon which was the lowest level of the 2010 peak summer driving season and the second lowest price at this point in the past five summers.

Still not even that may save the demand side of the equation. With storms battering up and down the East Coast, demand for gasoline was most likely impacted negatively. We are in the heart of the shoulder season and demand will continue to be very weak. We still maintain a bearish bias but still recommend playing the ranges.

The storms in the Atlantic never seem to end. There are 3 tropical waves that currently have about a 30% chance of becoming a tropical cyclone. At this time the storms do not seem to be a threat still they will bear watching.

What the bears really need to do is watch the me on the Fox Business Network and the bulls should join in too. If you don’t get it you need too!

Sign up for Phil's daily energy report and his daily buy and sell points on all of the major commodities by emailing him at pflynn@pfgbest.com.

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Crude Oil Technical Outlook For Tuesday Morning

Crude oil was lower overnight as it consolidates some of the rally off August's low. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term.

Closes above the reaction high crossing at 75.58 are needed to confirm that a short term low has been posted. If October renews the decline off August's high, May's low crossing at 70.35 is the next downside target.

First resistance is the 20 day moving average crossing at 74.80.
Second resistance is the reaction high crossing at 75.58.

Crude oil pivot point for Tuesday morning is 74.12

First support is the reaction low crossing at 70.76.
Second support is May's low crossing at 70.35.

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Where is Crude Oil ETF USO Headed on Tuesday?

Our Smart Scan Chart Analysis for the crude oil ETF....USO, is showing some near term rallying power. However, this market remains in the confines of a longer term downtrend that should be traded with tight money management stops.

Based on a pre-defined weighted trend formula for chart analysis, USO scored -75 on a scale from -100 (strong downtrend) to +100 (strong uptrend):



+10......Last Hour Close Above 5 Hour Moving Average
+15......New 3 Day High on Friday
-20......Last Price Below 20 Day Moving Average
-25......New 3 Week Low, Week Ending August 28th
-30......New 3 Month Low in May
-75......Total Score


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