Dan Dicker, senior contributor for TheStreet, breaks down oil's recent rally and defends his love for Exxon.
Hottest Investment Plays in North America: Oil and Gas Bulletin
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Wednesday, September 15, 2010
Crude Oil Bulls Struggle to Maintain Their Advantage, Here's Wednesdays Closing Numbers
Crude oil closed lower due to profit taking on Wednesday as it consolidates some of the rally off August's low. The mid-range close sets the stage for a steady opening on Thursday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term. If October extends the rally off August's low, the 62% retracement level of the August decline crossing at 78.58 is the next upside target. Closes below the 20 day moving average crossing at 74.47 would temper the near term friendly outlook. First resistance is Monday's high crossing at 78.04. Second resistance is the 62% retracement level of the August decline crossing at 78.58. First support the 20 day moving average crossing at 74.47. Second support is August's low crossing at 70.76.
Natural gas closed higher on Wednesday as it extended Tuesday's breakout above the 20 day moving average. The mid-range lose 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 October extends this week's rally, the 25% retracement level of the June-August decline crossing at 4.102 is the next upside target. Closes below the 10 day moving average crossing at 3.866 would temper the near term friendly outlook. First resistance is today's high crossing at 4.060. Second resistance is the 25% retracement level of the June-August decline crossing at 4.102. First support is the 10 day moving average crossing at 3.866. Second support is August's low crossing at 3.697.
The U.S. Dollar closed higher due to short covering on Wednesday as it consolidated some of this week'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 December extends the decline off August's high, August's low crossing at 80.75 is the next downside target. Closes above the 20 day moving average crossing at 82.94 would confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 82.51. Second resistance is the 20 day moving average crossing at 82.94. First support is Tuesday's low crossing at 81.24. Second support is August's low crossing at 80.75.
Gold closed lower due to profit taking on Wednesday as it consolidated some of Tuesday's rally. Stochastics and the RSI are overbought, diverging but are turning bullish again signaling that sideways to higher prices is possible near term. If December extends the rally off July's low, upside targets will now be hard to project following yesterday's rally to a new contract high. Closes below the reaction low crossing at 1237.90 would confirm that a double top with June's high has been posted. First resistance is Tuesday's high crossing at 1276.50. First support is the 20 day moving average crossing at 1245.90. Second support is the reaction low crossing at 1237.90.
Hottest Investment Plays in North America: Oil and Gas Bulletin
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Only a Handful of Investors Truly Understand
For every dollar producers put in the ground to get the oil, they get anywhere from $3-$7 back, sometimes up to $11, compared to $1-$3 for light oil. That's due to two factors:
1. The heavy oil is shallow so it doesn't cost much to get out, and
2. U.S. refineries love Canadian crude as Mexico and Venezuela heavy oil production declines, so heavy oil prices in Canada are now strong
And Canada has more of this oil than anyone else in the world. The real opportunity comes from the fact that right now, at this very moment, only a few junior and intermediate producers focus on cold flow heavy oil. That will soon change and as a result, investors will see a host of explosive new profit opportunities as this massive Canadian resource gets developed.
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Phil Flynn: A Trillion Reasons To Buy Oil May Not Be Enough
What also seemed to help was this perception that with the reelection of Japan’s Prime Minister Naoto Kan's in the Democratic Party of Japan leadership, it could be less likely that Japan will intervene in the yen. WRONG!!! The yen seemed to taunt the prime minster hitting a 15 year high against the dollar and only then the Japanese finally said enough is enough and intervened in the yen for the first time in 6 years.
Reuters News quoted Finance Minister Yoshihiko Noda as saying, "Japan intervened in the currency market as the impact of the yen's rise on the economy could not be ignored and that Japan would continue to take action, but that it had been acting alone.” Reuters said that estimates on how much yen selling Japan had done in Asia varied widely.
Dealers cited talk of 300-500 billion yen ($3.6 billion-$6 billion) although some reports put it closer to 100 billion yen. Of course prior to the intervention and while gold and silver were flying high, oil sagged on the fact that.....Read the entire article.
Hottest Investment Plays in North America: Oil and Gas Bulletin
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Saudi Arabia Set to Raise Crude Oil Production
2 major themes dominating the market are Japanese government's unexpected intervention of yen and Fed's extension of QE by increasing bond purchases. Gold consolidated in Asian and European sessions after rallying above 1270 yesterday. Outlook remains firm and is likely to extend gains to 1300. Crude oil weakened for a second day and is currently trading below 76. Despite OPEC's downward revision on demand for the cartel's oil, Saudi Aramco said that it's ready to boost production as consumption in emerging markets expands.
With the exception of China, most Asian stocks surged as led by Japan's Nikkei Stock Average which added +2.34%. Japan's measures to curb yen's appreciation revived optimism on the country's export-driven economy. For the first time in 6 years, the BOJ intervened by buying dollar and selling yen as the country's currency has surged to the highest level in 15 years. The action was a surprise to the market as it's widely expected Naoto Kan, the re-elected Prime Minister, is less aggressive in curbing yen's appreciation. That said, the impact of the intervention should not last for long as it appeared to be carried out unilaterally, rather than in collaboration with other central banks.
China's stocks fell amid speculations that the country may raise banks' capital adequacy ratios to as high as 15% by 2012 and the government will accelerate restrictive measures to boost energy efficiency in coming months.
At an interview with the Globe and Mail, a Canadian newspaper, Khalid al-Falih, head of Saudi Aramco, Saudi Arabia's state oil company, said he expects global demand for crude oil to rise, mainly from from China and India, and the company is ready to boost production to meet any increase. The comments appeared to be in contrast with OPEC's monthly report that lowered the demand for the cartel's output by -0.1M bpd and -0.2M bpd for 2010 and 2011 respectively as non OPEC production increased. We believe Khalid's saying aimed at reducing the country's spare oil capacity.
Saudi Arabia, which produces 8.5M bpd and has the capacity for an output of 12.5M bpd, is looking to increase output by about +2M bpd over the next 5 years, thus trimming the spare capacity 2M bpd. According to OPEC's September report, the 11 members bearing quotas produced 26.799M bpd, bringing the compliance level +0.9% higher to 53.5%, in August.
The US government will report industrial production which probably grew +0.3% m/m in August, following a +1% growth in the prior month. Capacity utilization rate should have climbed to 74.9% in August from 74.8% in July. The Empire State manufacturing index is expected to have crawled higher for a second month to 9 in September after plummeting to a 7-month low of 5.1 in July.
From Oil N' Gold Focus.....
Just click here for your FREE trend analysis of crude oil ETF USO
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With the exception of China, most Asian stocks surged as led by Japan's Nikkei Stock Average which added +2.34%. Japan's measures to curb yen's appreciation revived optimism on the country's export-driven economy. For the first time in 6 years, the BOJ intervened by buying dollar and selling yen as the country's currency has surged to the highest level in 15 years. The action was a surprise to the market as it's widely expected Naoto Kan, the re-elected Prime Minister, is less aggressive in curbing yen's appreciation. That said, the impact of the intervention should not last for long as it appeared to be carried out unilaterally, rather than in collaboration with other central banks.
China's stocks fell amid speculations that the country may raise banks' capital adequacy ratios to as high as 15% by 2012 and the government will accelerate restrictive measures to boost energy efficiency in coming months.
At an interview with the Globe and Mail, a Canadian newspaper, Khalid al-Falih, head of Saudi Aramco, Saudi Arabia's state oil company, said he expects global demand for crude oil to rise, mainly from from China and India, and the company is ready to boost production to meet any increase. The comments appeared to be in contrast with OPEC's monthly report that lowered the demand for the cartel's output by -0.1M bpd and -0.2M bpd for 2010 and 2011 respectively as non OPEC production increased. We believe Khalid's saying aimed at reducing the country's spare oil capacity.
Saudi Arabia, which produces 8.5M bpd and has the capacity for an output of 12.5M bpd, is looking to increase output by about +2M bpd over the next 5 years, thus trimming the spare capacity 2M bpd. According to OPEC's September report, the 11 members bearing quotas produced 26.799M bpd, bringing the compliance level +0.9% higher to 53.5%, in August.
The US government will report industrial production which probably grew +0.3% m/m in August, following a +1% growth in the prior month. Capacity utilization rate should have climbed to 74.9% in August from 74.8% in July. The Empire State manufacturing index is expected to have crawled higher for a second month to 9 in September after plummeting to a 7-month low of 5.1 in July.
From Oil N' Gold Focus.....
Just click here for your FREE trend analysis of crude oil ETF USO
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Credit Suisse Analyst is Bullish on Two Engineering and Construction Firms
Analyst Jamie Cook called shares of Fluor Corp. and Foster Wheeler AG "top picks" in a note to investors on Wednesday. The companies build infrastructure to ship natural gas, and their shares have been depressed because natural gas prices have been relatively low. Natural gas prices are trading around $4 per 1,000 cubic feet on the New York Mercantile Exchange. That's higher than the same time last year but only about half of what natural gas traded for in 2008.
Cook said prospects for new contract awards and additional backlog for oil and natural gas work "should ramp up in 2011," citing private industry sources. "Areas of optimism include Saudi Arabia, Abu Dhabi, Australia, Brazil, India, China and Iraq, but longer term," Cook said. Cook maintained an "Outperform" rating on Fluor with a $56 price target. He maintained the same rating on Foster Wheeler with a price target of $31. Shares of Fluor fell 9 cents to $48.85 in morning trading. Shares of Foster Wheeler fell 18 cents to $24.22.
From INO.Com/AP
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Crude Oil Technical Outlook For Wednesday Morning
Crude oil was lower overnight as it consolidates some of the rally off August's low. Stochastics and the RSI are overbought and are turning neutral warning bulls to use caution as a short term top might be in or is near.
Closes below the 20 day moving average crossing at 74.47 would confirm that a short term top has been posted. If October extends the rally off August's low, the 62% retracement level of the decline off August's high crossing at 78.58 is the next upside target.
First resistance is Monday's high crossing at 77.50
Second resistance is the 62% retracement level off August's high crossing at 78.58
Crude oil pivot point for Wednesday morning is 77.00
First support is the 10 day moving average crossing at 75.27
Second support is the 20 day moving average crossing at 74.47
The "Super Cycle" in Gold and How It Will Affect Your Pocketbook in 2010
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Closes below the 20 day moving average crossing at 74.47 would confirm that a short term top has been posted. If October extends the rally off August's low, the 62% retracement level of the decline off August's high crossing at 78.58 is the next upside target.
First resistance is Monday's high crossing at 77.50
Second resistance is the 62% retracement level off August's high crossing at 78.58
Crude oil pivot point for Wednesday morning is 77.00
First support is the 10 day moving average crossing at 75.27
Second support is the 20 day moving average crossing at 74.47
The "Super Cycle" in Gold and How It Will Affect Your Pocketbook in 2010
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Tuesday, September 14, 2010
Commodity Corner: Pipeline Outage Continues, But Oil Ends Lower
Crude prices settled at $76.80 a barrel, a 39 cent decrease from the previous day's trading session. The continued shutdown of Line 6A of Enbridge's Lakehead System near Chicago is providing support for oil prices. Line 6A, which can carry up to 670,000 barrels a day from Canada to the upper Midwest, will not be allowed to restart until U.S. government regulators deem it safe. Already causing a sharp increase in gas prices across the region, investors fear the supply disruption could begin to drain U.S. oil inventories.
Additionally, sluggish economic growth in Germany applied downward pressure to crude futures. A survey revealed lower than expected German investor sentiment, and industrial production in the euro area was flat in July, according to EU's statistics office. Analysts suggest that despite China's booming economy, mixed economic conditions in the U.S. and Europe have kept price increases in check.
The intraday range for October crude was $76.21 to $77.99 a barrel.
Meanwhile, natural gas for October delivery rose 2.8 cents Tuesday to settle at $3.97 per thousand cubic feet. The third price increase in as many trading days supports speculation that the days of lower natural gas futures may have passed for the season. However, some analysts are being cautious and are not declaring a seasonal rally yet. Gas prices were threatened earlier Tuesday on forecasts of storm clusters forming in the Gulf of Mexico, but no immediate storm threats have been seen, steering clear of production outages. Natural gas
fluctuated between $3.84 and $4.02 Tuesday.
RBOB gasoline settled lower at $1.97 a gallon, peaking at $2.00 and bottoming out at $1.96.
From the staff at Rigzone
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Where is Crude Oil and Gold Headed on Wednesday?
CNBC's Sharon Epperson discusses the day's activity in the commodities markets, and looks ahead to where oil and gold are likely headed tomorrow.
Stock Market and Commodities Summary For Tuesday Sept. 14th
Crude oil closed down $0.41 at $76.78 a barrel today. Prices closed near mid range today and saw a corrective pullback from recent gains and were also pressured by some weak economic data coming out of Germany. Bulls still have the slight near term technical advantage. The next near term upside price objective for the bulls is producing a close above solid technical resistance at $80.00 a barrel.
Natural gas closed up 1.7 cents at $3.955 today. Prices closed nearer the session high today and hit another fresh three week high on short covering in a bear market. The bears still have the overall near term technical advantage. A three month old downtrend is still in place on the daily bar chart.
Gold futures closed up $24.90 at $1,272.00 today. Prices closed near the session high today and soared to a fresh contract and all time record high. A sharply lower U.S. dollar and some fresh safe haven investment demand boosted gold higher today. A dour economic report coming out of Germany today spooked the markets in Europe, and that added to buying interest in gold. Now, look for price volatility in the gold market to heat up in the near term, with bigger daily price movements likely, both on the upside and on the downside. Gold bulls still have the strong overall near term and longer term technical advantage.
The U.S. dollar index closed down 72 points at 81.46 today. Prices closed near the session low again today and hit another fresh four week low. Bears have the near term technical advantage and gained more downside momentum today. Bulls' next upside price objective is to close prices above solid technical resistance at last week's high of 83.31.
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