Wednesday, September 29, 2010

Stock Market and Commodities Commentary For Wednesday Evening Sept. 29th

The U.S. stock indexes closed mixed today. The indexes earlier this week hit fresh multi month highs. Bulls still have upside near term technical momentum. We are half way through the historically bearish period from September to October, and the stock indexes have so far performed very well. It is my bias that if this autumn were to see serious market turbulence, it would likely have occurred during September. I would not be surprised to see the stock indexes rally during October and then trade sideways and choppy into the end of the year.

Crude oil closed up $1.53 at $77.71 a barrel today. Prices closed nearer the session high today following a bullish weekly U.S. stocks report. Bulls have gained the near term technical advantage in crude. The next near term upside price objective for the bulls is producing a close above solid technical resistance at the September high of $78.86 a barrel.

Natural gas closed up 1.4 cents at $3.965 today. Prices closed near the session high today in quiet trading and saw more tepid short covering in a bear market. The bears still have the solid overall near term technical advantage. The next upside price objective for the bulls is closing prices above solid technical resistance at the September high of $4.298.

Gold futures closed up $3.20 at $1,311.60 today. Prices today closed near mid range today and scored another fresh record high. A weaker U.S. dollar and more safe haven buying interest boosted gold again today. Gold bulls have the solid overall near term technical advantage. There are still no early technical clues to suggest a market top is close at hand in the gold market. Prices are in a two month old uptrend on the daily bar chart.

The U.S. dollar index closed down 23 points at 78.97 today. Prices closed near mid range today and hit another fresh eight month low. Bears have the solid overall near term technical advantage. There are no early clues to suggest a market bottom is close at hand. Bulls' next upside price objective is to close prices above solid technical resistance at 81.00.

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Musings: Marcellus Shale....Good News Critique

In the last issue of the Musings, we wrote about good news and bad news for the development of the Marcellus gas shale deposit extending across New York, Pennsylvania, West Virginia and eastern Ohio. This deposit with its multiple shales is considered to be potentially the largest gas deposit in the United States. It’s economics are challenging as the area is hilly, the road access is less than ideal, the land holdings are fractured and the public is not necessarily enamored with oil and gas drilling activities, especially hydraulic fracturing, which is key to the successful development of gas shale deposits. Low natural gas prices are potentially the biggest hurdle for Marcellus gas profitability.

Our article discussed the recently released 12 month natural gas production data for wells in the Pennsylvania portion of the Marcellus through June. The data showed average cumulative production for Marcellus horizontal wells in the 5 county core area of the North Central and Northeast part of Pennsylvania. The new data shows solid production results, and in fact, the average well’s production slightly exceeded the expected production suggested by Chesapeake Energy (CHK-NYSE) in a 2008 investor presentation. That chart was presented to show the company’s anticipated well economics for its foray into the region. Pennsylvania has a long history of oil and gas having been the cradle of the U.S. oil business with.....Read the entire article.


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Phil Flynn: Peak Oil Mirage

The closer we get to peak oil the further it goes away. As high prices collapsed when the global economic system fell apart the world is now awash in oil. Back around the beginning of this decade Fed Chairman Allan Greenspan warned that peak natural gas production in this country could put us in a competitive disadvantage.

Now it appears that some of the same ideas that took us from peak natural gas to an abundant supply could also change the supply outlook for oil. The Financial Times is reporting that, “A band of entrepreneurial oilmen have found an economic way to extract oil from shale rock, fuelling a frenzy for prospects that has pushed up lease prices and lifted hopes of the first rise in onshore US oil production in decades”.

The Times says, “These small independent oilmen had used hydraulic fracturing and horizontal drilling to triple estimates of US natural gas supplies and are now applying that same technology to get oil from shale rock”. The FT says that the method could add one million barrels of oil a day to US supplies in five to eight years replacing 10 percent of US crude imports. And that might just.....Read the entire article.

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Do You Really Understand How To Use Fibonacci Retracements

Do you know how to use the Fibonacci tool in your trading. I mean, do you REALLY know how to use it. We have had a number of requests to do a video on Fibonacci retracements and how they can be used in trading.

We put together this five minute lesson on Fibonacci trading and how we use this important tool to determine turning points in the market. Like all tools, it has its flaws and should be used with other complementary tools like our "Trade Triangle" technology.

As always, our videos are free to watch and there are no registration requirements. We hope you have the time to comment and share if this video helped you understand this important trading tool, or how you're already using it.

We hope you enjoy this brief lesson and it helps you understand how to use this important tool.


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Crude Oil Daily Technical Outlook Wednesday Morning Sept. 28th

Crude oil was higher overnight as it consolidates above the 20 day moving average crossing at 76.16. November has stalled above the 20 day moving average this week as concerns over demand have helped to limit near term gains.

At the same time, stochastics and the RSI are bullish signaling that sideways to higher prices are possible near term. If November extends the rally off last week's low, the reaction high crossing at 78.86 is the next upside target. Closes below last Thursday's low crossing at 73.58 would renew the decline off this month's low.

First resistance is Monday's high crossing at 77.17
Second resistance is the reaction high crossing at 78.86

Crude oil pivot point for Wednesday morning 76.28

First support is last Thursday's low crossing at 73.58
Second support is the reaction low crossing at 73.08

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Tuesday, September 28, 2010

Crude Oil Rises After an Industry Report Shows Decline in U.S. Stockpiles

Crude oil advanced for the fifth time in six days in New York as an increase in Chinese manufacturing and a decline in U.S. supply bolstered speculation fuel demand in the world’s two biggest energy consumers will rise. Futures retraced yesterday’s 0.4 percent drop after a purchasing managers’ index showed manufacturing in China, the fastest growing major economy, accelerated for a second month. An Energy Department report today will probably show crude inventories in the U.S. fell last week, according to a Bloomberg News survey of analysts.

“There is still reasonable demand out there, and perhaps the sentiment toward economic optimism is still quite positive,” said Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney. Crude for November delivery rose as much as 44 cents, or 0.6 percent, to $76.62 a barrel in electronic trading on the New York Mercantile Exchange. It was at $76.45 at 1:37 p.m. Singapore time. Yesterday, the contract decreased 34 cents to settle at $76.18, snapping a four day rally.

Futures are down 3.5 percent this year. For September, the contract has climbed 6.3 percent and is poised for a 1.1 percent gain for the third quarter. An index of China’s manufacturing released today by HSBC Holdings Plc and Markit Economics rose to 52.9, the highest in five months, from 51.9 in August. The data are seasonally adjusted and readings above 50 indicate an expansion. China overtook the U.S. as the world’s largest energy user last year.....Read the entire article.



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Crude Oil's Time of the Year

The Fast Money guys and gal discuss the nature of the energy trade in October. Is it time for crude oil to rally?



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Stock Market and Commodities Commentary For Tuesday Evening Sept. 28th

The U.S. stock indexes closed firmer today despite a weak consumer confidence index reading that sunk the U.S. dollar. The indexes this week have hit fresh multi month highs. Bulls still have upside near term technical momentum as the stock market continues to "climb a wall of worry." We are half way through the historically bearish period from September to October, and the stock indexes have so far performed very well. It is my bias that if this autumn were to see serious market turbulence, it would likely have occurred during September.

Crude oil closed down $0.41 at $76.11 a barrel today. Prices closed near mid-range again today. Bulls and bears are on a level near term technical playing field. The next near term upside price objective for the bulls is producing a close above solid technical resistance at the September high of $78.86 a barrel.

Natural gas closed up 4.5 cents at $3.961 today. Prices closed near mid range again today and saw tepid short covering in a bear market. The bears still have the solid overall near term technical advantage. Prices have seen a bearish downside "breakout" from a sideways trading range at lower price levels.

Gold futures closed up $9.80 at $1,308.40 today. Prices today closed near the session high, scored another fresh record high and scored a big and bullish "outside day" up on the daily bar chart, whereby the high is higher and low is lower than the previous day's trading range, with a higher close. A weaker U.S. dollar and safe haven buying interest following some dour U.S. economic data today boosted gold. Gold bulls have the solid overall near term technical advantage and gained more power today.

The U.S. dollar index closed down 33 points at 79.22 today. Prices closed nearer the session low today and hit another fresh eight month low. Prices also scored a bearish "outside day" down on the daily bar chart. Bears have the solid overall near term technical advantage.


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A Breakthrough Invention in the Oil and Gas Market?

From Keith Schaefer at "Oil and Gas Investments Bulletin"....

An oil and gas entrepreneur in the US has devised an inexpensive way to capture oil and natural gas vapors around a well site, and sell them to make money. These vapors are often flared (burned), or vented into the atmosphere, and trust me, if people really knew how much oil and gas was flared around the world every day, even in first world countries, the media outcry would make the "water fracking" issue look like a kindergarten party. In fact satellite images show intense flaring occurring, principally in third world countries. Shell has just committed $2 billion to reduce flaring from its operations in Nigeria.


“Air pollution requirements related to oil and gas production from the states are becoming increasingly restrictive,” says co-inventor Dr. Paul Trost. And Trost's solution can be profitable. He adds that a study near Denver in the hydrocarbon rich Denver Basin containing almost 8000 oil and gas wells showed the “fugitive” hydrocarbons, gases emanating from production tanks can be captured and sold at a profit rather than burned in a flare. Just like water evaporates in a dish, oil and gas evaporates from the production tank at a well site, and escapes into the atmosphere or alternately is burned (flared).

The problem becomes bigger when a combination of gas and oil are produced with the gas being injected into a pipeline having pressure. The oil then is also pressurized and the pressurized gases (like gas in a pop can) then “flash” or boil off like a shaken beer can. In certain areas these gases are captured and directed to a flare for burning rather than being allowed to vent to the atmosphere.

Trost’s invention, called the V3RU (Variable Volume Vapor Recovery Unit), is different than other vapor recovery systems in that it uses a flexible accumulator (bag) to capture the vapors. “It swells up like it is taking a deep breath,” says Trost. “The bag thus captures both the flash gas and also any contained liquids. We exhale it slowly into compressor for injection and sale to a pipeline. It’s a variable volume bag and it’s safety rated. The alternative energy industry already uses it around breweries located in or adjacent to cities.” Without a bag, Trost says oxygen can get at the vapour and then it won’t meet pipeline specifications. The gas is then useless and must be flared. Using a bag allows some back pressure to be used, so it won’t let air in, and the gas retains its purity and suitability for pipeline sale.

Trost says the payout for the V3RU increases as the oil content of the natural gas increases, and also as the oil gets lighter (has a higher API rating) and contains more condensate. Typically the V3RU will range in cost from $8,000-$30,000. He gives a real life example of a gas/condensate well in Colorado that was producing about 30 BOPD and 400 mcfd, but high pipeline pressures were causing a large amount of “flash” gas, containing both recoverable oil and gas, was being lost. Application of the V3RU will allow the operator was able to capture an additional 8-10 boe/d, resulting in roughly a 2 year payout.

The product has been used almost exclusively in the Denver Basin, Trost says, but it is now starting to be used in other areas. Trost is a board member of Nextraction Energy (NEX-TSXv), which will be using the V3RU vapor recovery system to meet air quality regulations at Nextraction’s newly discovered gas-condensate well located at the Pinedale Anticline play in Wyoming.

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Georgian President: No Problem Getting Oil Financing

Georgia President Mikhail Saakashvili says the country is having no difficulties getting financing for energy projects.




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