Crude Oil Technical Outlook For Tuesday Morning Oct. 5th

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

If November extends the rally off last week's low, August's high crossing at 83.91 is the next upside target. Closes below the 20 day moving average crossing at 77.31 would confirm that a short term top has been posted.

First resistance is Monday's high crossing at 82.38
Second resistance is August's high crossing at 83.91

Crude oil pivot point for Tuesday morning is 81.54

First support is the 10 day moving average crossing at 78.20
Second support is the 20 day moving average crossing at 77.31


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As Crude Oil Climbs, Expect $100 per Barrel by January, 2011

From analyst Dian L. Chu.....

Last week the shorts were all lined up for another bearish inventory report for Petroleum products from the EIA, but lo and behold, miracles do actually occur. We had an extremely bullish report (Fig. 1) which caught a lot of traders poorly positioned, and many fund managers underexposed to the commodity, which relative to Gold, Silver, and Copper, smelled like a bargain in the face of further quantitative easing expected by the Federal Reserve in the 4th quarter.

The technicals indicate that upward resistance will not be found until the $84 per barrel level, so despite Crude Oil moving from roughly $75.60 before the report on Wednesday morning to close Friday`s electronic session at $81.73, a $6.13 move in 3 days, there is still more room to go for this upward move in the commodity. (Fig. 2)

The real surprise in the report was the large drop--3.5 million barrels-- in gasoline inventories, and the RBOB contract needed to re-price itself given this change which was largely due to lower imports on the supply side, as demand for gasoline is still relatively anemic year on year.

Distillate demand has recovered strongly over the last 6 weeks from the lows of the summer (Fig. 3), and is quite robust year on year, and a great sign that the double dip scenario is officially off the table. Remember, that distillate demand represents usage from the industrial and manufacturing sectors of the economy, which will be the first indications of potential economic strength or weakness.....Read the entire article.

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Crude Oil Trades Near Eight Week High After U.S. Stocks Fall, Goods Orders Gain

Crude oil traded near an eight week high in New York after equities slipped and orders for U.S. capital goods increased the most since March. Futures retreated yesterday after stocks declined for the third time in four days and the dollar advanced against the euro. The Commerce Department reported that orders for non military capital goods excluding planes climbed 5.1 percent. An Energy Department report tomorrow will probably show crude supplies rose last week, according to a Bloomberg News survey.

“It’s hard to justify a further move higher with stocks down and the dollar stronger,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “We’ll see if we can consolidate here and keep an eye on this week’s economic reports.” The November contract traded at $81.39 a barrel, down 8 cents, in electronic trading on the New York Mercantile Exchange at 9:45 a.m. Sydney time. Yesterday it lost 11 cents to $81.47. Oil closed at $81.58 on Oct. 1, the highest level since Aug. 5. Prices are up 2.5 percent this year.

The Standard & Poor’s 500 Index dropped 0.8 percent to 1,137.03 at the 4 p.m. close in New York, and the Dow Jones Industrial Average shed 0.7 percent to 10,751.27. The dollar strengthened from a six month low against the euro as concern that Europe’s major banks are undercapitalized made the region’s assets less attractive. The U.S. currency traded at $1.3676 after falling 0.8 percent yesterday.....Read the entire article.

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Hey Sharon....Where is Crude Oil and Gold Headed on Tuesday?

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.



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Stock Market and Commodities Commentary For Monday Evening Oct. 4th

The U.S. stock indexes closed weaker today on more profit taking. No near term chart damage has occurred and the bulls still have the near term technical advantage. The indexes last week hit fresh multi month highs. Traders are gearing up for Friday's U.S. employment report. Look for more subdued trading in the stock indexes until then, but then look for an active trading day on Friday, in the wake of the jobs data.

Crude oil closed up $0.03 at $81.61 a barrel today. Prices closed near mid range today and hit a fresh two month high. Bulls still have the near term technical advantage in crude and have good upside near term technical momentum. Prices are in a six week old uptrend on the daily bar chart.

Natural gas closed down 6.8 cents at $3.729 today. Prices closed near mid range today and hit a fresh contract low. The bears have the solid overall near term technical advantage and have gained more downside power recently. The next upside price objective for the bulls is closing prices above solid technical resistance at $4.00. The next downside price objective for the bears is closing prices below solid technical support at $3.50.

Gold futures closed down $1.30 at $1,316.50 today. Prices today closed near mid range and did some consolidation after scoring another fresh record high on Friday. Mild profit taking pressure was featured amid a firmer U.S. dollar index today. Gold bulls still have the solid overall near term technical advantage. There are no early technical clues that a market top is close at hand. Prices are in a nine week old uptrend on the daily bar chart.

The U.S. dollar index closed up 34 points at 78.65 today. Prices closed nearer the session high today and saw short covering in a bear market. Bears still have the solid overall near term technical advantage. There are still no early clues to suggest a market bottom is close at hand.

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Crude Oil and Gas Reserves Rise Despite Decline in Investment

Total hydrocarbon reserves worldwide increased for the first time since 2005 despite a decline in worldwide upstream investment and development spending. Worldwide upstream investment declined by 23 percent to $378 billion in 2009 among 224 oil and gas companies surveyed, but total worldwide total hydrocarbon reserves grew three percent, according to IHS Herold's report 2010 Global Upstream Performance Review. Production also increased one percent, driven by a 2.2 percent increase in natural gas output. Development spending declined by nearly 20 percent, the first decline in a decade.

"We were very surprised at the strength of reserve additions given the weak economic conditions and tightness in credit markets during 2009," said Nicholas D. Cacchione, director of IHS Herold and author of the report. Oil reserves reversed a two year decline, rising three percent to 164 billion barrels, mostly due to extensions and discoveries in the Canadian oil sands that added 8.6 billion barrels in positive reserve additions. A record 7.9 billion barrels also was added in the South and Central American regions also added a record 7.9 billion barrels.

Natural gas reserves climbed 3.7 percent despite a record 11.4 Tcf in negative reserve revisions, as development of unconventional plays in North America and liquefied natural gas resources in Asia accelerated. The decline in capital spending resulted from a 40 percent reduction by exploration and production companies, while the integrated oil companies cut investment by just nine percent. Exploration spending was most resilient, dropping just 12 percent to $62.7 billion. Unproved acquisition costs were down 71 percent, and a two percent dip in proved acquisition outlays would have fallen 50 percent were it not for the $20 billion Suncor/Petro-Canada merger.

Lower capital spending and higher reserves resulted in a near 50 percent decrease in reserve replacement costs, to $11.41/barrel of oil equivalent (BOE), and lowered finding and development costs to $12.23/BOE. Strong natural gas reserve additions led reserve replacement rates to the highest levels in five years.....Read the entire article.


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Phil Flynn: Easy Oil

Who has the second largest amount of proven conventional oil reserves or easy to get to oil? Well if you asked me yesterday the answer officially was Iran but today that all may change. Iraq has announced that they will increase the amount of their proven oil reserves from mere 115 million barrels of oil to a whopping 143.1 billion barrels of oil putting them in second place in the world of cheap, easy to get to oil. Dow Jones reports that the figure, the first update since 2001, would mean Iraq has the world's second largest reserves according to statistics on the OPEC website.

Iraq would take second place from Iran, which has 137.01 billion barrels of proven reserves, but would still be far behind Saudi Arabia, which has 264.59 billion barrels of proven oil reserves, according to OPEC figures. These aren't random figures, rather they were the results of deep surveys carried out by the ministry's oil reservoir company and international companies which signed contracts with Iraq," al-Shahristani said. "Most of these figures were the result of surveys conducted by these international companies, especially at oil fields such as West Qurna and Zubair." Dow Jones say that Iraq has signed 12 deals with international oil companies to ramp up.....Read the entire article.


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Price Headley: Last Week's Action May be the Start of a Small Correction

The Crude Oil Trader would like to welcome our newest contributor Price Headley at BigTrends.com. Here is Price's weekly market report for Monday October 4th....

The four week win streak came to an end last week last week, though barely. Still, all pullbacks start with a small step, and last week's action may well be the beginning of at least a small correction. The dip came despite the much-improved economic news. Nearly all the data not only rolled in better than expected, but showed sustained improvements…. income, spending, sentiment (except for the Conference Board's consumer confidence), GDP, and most of the other data nuggets were pointed higher.

So why the pullback? It's all a matter of timeframes. In the long run, the good economic news should indeed translate into more bullishness for stocks. In the near-term (which is our primary focus from one week to the next), fear, greed, momentum, and excess movement drive the market for option trading. That's what we'll dissect below, after a closer look at the economy.

Economic Outlook
It was a plenty busy week last week on the economic front, with a rough start, but a strong finish. Though still improving, the rate of increase in home values, according the Case-Shiller index – slowed to a pace of 3.18% last month, versus the prior increase of 4.21%. Also on Tuesday, the Conference Board said consumer confidence slumped from 53.2 to 48.5 last month.

From Thursday on, however, it was nothing but good news.

Q2's GDP was revised upward, to 1.7%. Initial claims sank to near-multi-year-lows of 453K, while ongoing claims fell to 4457K… also approaching new multi year lows. The lines in the sand for each are 440K and 4430K, respectively. On Friday, the news got even more compelling. Incomes as well as spending were both up, and better than anticipated (by 0.5% and 0.4%, respectively). And, the prior week's problematic University of Michigan Sentiment number was revised upward, from 66.6 to 68.2.

How does the continued uptrend in incomes as well as spending last while both confidence measures sink? As we've said before, the confidence opinion polls are 'supposed to be' assessments about the next six months. In reality, they are assessments of the prior month. Moreover, in many ways they can be interpreted as contrarian indicators....meaning be bullish when they're most bearish, and vice versa.

Indeed, Friday's latter data confirmed that consumers aren't nearly as mired as they claim to be. Construction spending was up a tad, against the backdrop of an expected 1.4% contraction. And, though the final numbers aren't in yet, auto sales have remained strong this year – and in September – despite worries that things are going to get worse before they get better. It's all below.

Let's take a look at the charts for this coming week.....Price Headley's view for this week.

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Bloomberg Analysis: Crude Oil to Hit Resistance Level at $86.70 This Week

Crude oil may fail to breach the $86.70 a barrel level this week based on statistical analysis used by traders to gauge prices, the Schork Group Inc. said. Crude’s resistance at that level corresponds to the upper limit of the confidence interval, a statistical range with a specified probability that a given parameter lies within the boundaries. Oil is most likely to trade this week between $76.76 a barrel and $86.70, according to the Schork Group.

Oil prices have jumped 4.7 percent since Sept. 29 to $81.53 today as signs of positive economic growth in the U.S. and China improve the outlook for fuel demand. Crude’s gains may sputter to a halt as prices climb to highs reached earlier this year in April and May. “Prices will hit serious resistance in any attempt to cross the $86.70 barrier,” said Schork Group President Stephen Schork. Oil climbed to this year’s highest close at $86.84 on April 6 and reached $86.19 on May 3, followed by sell offs below $70, he said.

The November contract was at $81.52 a barrel, down 6 cents, in electronic trading on the New York Mercantile Exchange at 11:54 a.m. Singapore time after reaching $81.87. It surged $1.61 to settle at $81.58 on Oct. 1, the highest close since Aug. 5, capping the biggest weekly gain since February. “The bulls should have enough momentum to hold prices close to either side of the $80 barrier, thus we expect prices to trade safely inside our confidence interval,” the Schork Group said.

Reporter Christian Schmollinger can be contacted at christian.s@bloomberg.net.

Courtesy Bloomberg News


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