Crude Oil Inventories Climb as Refinery Processing Drops

U.S. oil supplies probably rose last week as refineries undergoing seasonal maintenance cut their processing rates to the lowest level since April, reducing demand for crude, a Bloomberg News survey showed. Stockpiles gained 400,000 barrels, or 0.1 percent, from 357.9 million, according to the median of 13 analyst estimates before an Energy Department report tomorrow. Gasoline stocks were unchanged in the survey and distillates fell.

Oil prices climbed above $80 a barrel to the highest level in eight weeks after the Energy Department last week reported declines in supplies of gasoline and distillate, including heating oil and diesel. Oil stocks were 13 percent higher than the five-year average in the week ended Sept. 24. “We’re in the heart of maintenance season, so we’d expect a little bit of an increase in crude and a little bit of a drop in products,” said Phil Flynn, a Chicago based analyst and trader with investment adviser PFGBest. “Refinery runs are going to continue to be low.”

Refineries probably operated at 85.3 percent of capacity, down 0.5 percentage point from the previous week, according to the Bloomberg survey. That would be the lowest level since the seven days ended April 2. Rates dropped 2 percentage points in the week ended Sept. 24, compared with a forecast decline of 0.6 percentage point. Eight analysts forecast oil supplies increased last week, four projected a decline and one said there would be no change.....Read the entire article.


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Phil Flynn: Rate Ruckus

Is the winner the country that has the most ink? Gold prices soar to a new record high as once again a global central bank decides to print their way to prosperity. The Bank of Japan gave gold another reason to make a new high by announcing what Dow Jones Newswires says is, “an ambitious” Y35 trillion monetary easing program to spur economic growth while cutting interest rates to virtually zero and launching a Y5 trillion program to buy private and public sector assets. Ambitious?! Boy, I’d say.

I guess there is more than one way to intervene in your currency. The Japan government is adding more stimuli while reducing the confidence in paper money. Looks like a golden opportunity to buy more gold. Perhaps it's time to buy black gold as well. Oil traders love to exploit devalued currencies and devalued confidence in the same way. Yesterday the oil market ignored the rebounding dollar and supplies that are 13% above the five year average and instead returned to focus on the shutdown of the Houston Shipping Channel that was shut down when a barge hit an electrical tower.

That disruption helped send oil to an eight week high. Dow Jones reported that U.S. Coast Guard says that the 3 1/2 mile stretch of the Houston shipping channel will likely be closed until late Tuesday so that low hanging power lines and a listing tower can be cleared away. The closure will affect crude deliveries to four refineries in the Houston ship channel. Dow says that the tower, which carries one of three transmission lines into Exxon Mobil Corp.'s (XOM) Baytown refinery, was struck.....Read the entire article.




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Crude Oil Higher From Here?

If you listen to "The Street" it would appear oil has no where to go but up. But a quick look ay our Smart Scan Chart Analysis gives us good reason to be cautious about going long at these levels. Let's look at the most popular crude oil ETF, USO.

Our Smart Scan Chart Analysis shows the current uptrend in USO is very weak and at a crossroads and has possibly ended. Look for choppy trading action in the near term and as always make sure to trade this trend with very tight stops.

Based on a pre-defined weighted trend formula for chart analysis, USO scored +60 on a scale from -100 (strong downtrend) to +100 (strong uptrend)....

-10......Last Hour Close Below 5 hour Moving Avg
+15......New 3 Day High on Monday
+20......Last Price Above 20 Day Moving Average
+25......New 3 Week High, Week Ending October 9th
-30......New 3 Month Low in May
+60......Total Score

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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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