The Crude Oil Trader

Wednesday, November 10, 2010

Sharon Epperson: Where is Crude Oil and Gold Headed on Thursday?

CNBC's Sharon Epperson discusses the day's activity in the commodities markets, and looks at where oil and gold are likely headed tomorrow.

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Stock Market and Commodities Commentary For Wednesday Evening Nov. 10th

The S&P 500 index closed higher on Wednesday and the high range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI are overbought and are turning bearish hinting that a short term top might be in or is near. Closes below the 20 day moving average crossing at 1189.18 are needed to confirm that a short term top has been posted. If December extends the rally off August's low, the 62% retracement level of the 2007-2009 decline crossing at 1234.75 is the next upside target. First resistance is Tuesday's high crossing at 1224.50. Second resistance is the 62% retracement level of the 2007-2009 decline crossing at 1234.75. First support is the 10 day moving average crossing at 1201.80. Second support is the 20 day moving average crossing at 1189.18.

Crude oil closed higher on Wednesday as it extends the rally off August's low. The high range close sets the stage for a steady to higher 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 December extends the aforementioned rally, the 87% retracement level of May's decline crossing at 90.82 is the next upside target. Closes below the 20 day moving average crossing at 83.55 would confirm that a short term top has been posted. First resistance is today's high crossing at 88.10. Second resistance is the 87% retracement level of May's decline crossing at 90.82. First support is the 10 day moving average crossing at 85.00. Second support is the 20 day moving average crossing at 83.55.

Natural gas closed lower due to profit taking on Wednesday as it consolidates some of the rally off October's low. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term. If December extends the rally off October's low, the 38% retracement level of the June-October decline crossing at 4.362 is the next upside target. Closes below last Thursday's low crossing at 3.743 would confirm that a short term top has been posted. First resistance is today's high crossing at 4.249. Second resistance is the 38% retracement level of the June-October decline crossing at 4.362. First support is last Thursday's low crossing at 3.743. Second support is the reaction low crossing at 3.500.

Gold lower due to profit taking on Wednesday as it consolidated some of its recent gains. The high range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices is possible near term. If December extends this year's rally into uncharted territory, upside targets will now be hard to project. Closes below the reaction low crossing at 1315.60 would confirm that an important top has been posted. First resistance is Tuesday's high crossing at 1424.30. First support is the 20 day moving average crossing at 1359.70. Second support is the reaction low crossing at 1315.60.

The U.S. Dollar closed higher on Wednesday as it extended yesterday's rally above the 20 day moving average crossing at 77.36. The low range close sets the stage for a steady to lower opening on Thursday. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near term. Closes above the reaction high crossing at 78.61 are needed to confirm that a short term low has been posted. If December renews the decline off August's high, the November 2009 low on the weekly continuation chart crossing at 74.21 is the next downside target. First resistance is the reaction high crossing at 78.51. Second resistance is the reaction high crossing at 78.61. First support is last Wednesday's low crossing at 75.24. Second support is the November 2009 low on the weekly continuation chart crossing at 74.21.

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Exxon Holds Its Ground

Nearly a year ago, Exxon Mobil made a multibillion dollar bet on its vision that natural gas will become a dominant fuel during the next few decades. Tuesday, Chevron made a similar, albeit smaller, wager on a domestic natural gas producer. As Chevron starts to sell its Atlas deal to shareholders, Exxon continues to have trouble convincing its investors it made the right move.

Still, Exxon isn't veering from its long-term strategy of bulking up on U.S. natural gas. In December, the oil company announced plans to buy XTO Energy Inc. of Fort Worth, Texas, making Exxon the largest gas producer in the U.S. This summer, it bought gas producer Ellora Energy Inc. of Boulder, Colo., for $695 million, and opened a terminal along the Gulf Coast to import natural gas from the Middle East.

All the while, the price of natural gas has been falling, and is off 21% since Exxon announced the $25 billion XTO deal. On Tuesday, natural gas futures contract for December settled up 12.2 cents at $4.210 a million British thermal units on the New York Mercantile Exchange. The commodity is trading at low prices after newly developed drilling techniques exploited tight shale gas rock formations during the past decade, creating a glut.

The XTO acquisition lifted Exxon's energy output by nearly 14%, but brought in only about $150 million in net earnings in the third quarter, the first in which Exxon reported financial data that included XTO. That is about 3% of what the company earned from the sale of oil and natural gas during that period......Read the entire article.

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Natural Gas Catches a Bid as the U.S. Drowns in Supply

From guest blogger Trader Mark.....

On your mark... get set.... speculate! Since commodities have little to do with actual supply and demand in the physical market (as the world swims in oil, and the U.S. in natural gas), and everything to do with the supply of fiat currencies chasing physical assets, let us see if Bernanke can cause natural gas to take off. This has been the one huge laggard of the year, as nat gas is difficult to transport and hence reflects the domestic economic situation more than most other commodities. The commodity has spiked the past 2 days and the ETF (UNG) now sits at $6, just below the 50 day moving average. With oil peaking it head over its yearly highs Tuesday, speculators are in desperate search to find the next hot thing, as driving cotton and sugar limit up every day for 3 months in a row has gotten boring. The performance of natural gas has not just been bad, but indeed horrid when you consider it is priced in dollars just like every other commodity!

For economic reasons, energy is the most important commodity to watch, because while not everyone is going to take a hit if silver jumps $2 a day... we're all going to enjoy the fruits of Bernanke's labor if nat gas starts surging (for no fundamental reason) and oil can go on an early 2008-like rampage.

If this does happen, let us prepare for the April 2011 Congressional hearings where we drag the "Big Oil" CEOs up to Capital Hill and watch the politicos berate them publicly for "causing" prices to jump (while meeting with them privately to accept campaign donations) despite the "fantastical economic recovery"....

Meanwhile Bernanke will be skipping in his office a few buildings over sporting the Family Circus "Not Me" T-shirt.

Trader Mark will be launching a mutual fund October November 2010. He is a self taught private investor who operates the website Fund My Mutual Fund a daily mix of market, economic, and stock specific commentary.

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Phil Flynn: Is QE2 A Sin?

The Fed may be trying to save the economy with the printing of more money but the poor battered US consumers are so far bearing the brunt of this economic policy and let’s face it, it is a SIN. At the last Fed meeting the Fed famously said that it was, “prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time”. What they didn’t want to tell you was that time was now. It was President Gerald Ford that wore Famous “Win” button which stood for “Whip Inflation Now”. The Fed now should wear a “SIN” button which stands for “Start Inflation Now” and the way the commodities markets have responded, it’s probably time that the Fed start doing penance and a few Hail Mary’s. Because let’s face it, this QE2 is basically a Hail Mary pass.

You see if the Fed policy does not shock and awe the economy out of its stupor, then we may have printed 2.1 trillion dollars for nothing and the only thing that we may have to show for it is higher prices of commodities. With an economy that is still struggling, those higher prices that may kill the consumer. You see it seems that not only is gold and silver rising but those esoteric inflation items that like to be swept under the rug and ignored by some economists are rising as well, like food and energy. Not to mention the proverbial and actual shirt off your back. Have you checked out cotton prices lately? Cotton prices are up 100 percent this year, gold up 29%, soybeans up 27%. QE2 hopes to create economic activity but the consumers may have to pull back as their wallets get squeezed. Take a look for example at the stats on gasoline. Gas prices soared, rising from a national average.......Read the entire article.

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Crude Awakening in 2011?

Crude is bubbling to 2 year highs, with Byron Wien, Blackstone Advisory Svs., and Tom Petrie, Bank of America Merrill Lynch.

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Goldman Sachs: Oil Will Be "Substantially Higher" by 2012

Crude oil prices will be “substantially higher” by 2012 as the global stockpile surplus shrinks and excess production capacity drops, according to Goldman Sachs Group Inc., the most profitable bank in Wall Street history. Global economic growth will drive oil demand and reduce inventories, which are still “exceptionally high” in developed countries including the U.S., the world’s biggest user of crude, Goldman said in a report dated yesterday. Spare capacity held by the Organization of Petroleum Exporting Countries will decline as the 12-member group, which pumps 40 percent of the world’s oil, boosts supply to meet demand, the bank said.

“Despite the recent rally, we believe that forward price levels offer good hedging opportunities,” Goldman analysts, led by Allison Nathan in New York, said in the report. “We continue to expect improving fundamentals will provide additional support to prices.” Oil climbed to the highest in two years yesterday, and is up 7 percent this month, on speculation the Federal Reserve’s stimulus program will weaken the dollar, bolstering the investment appeal of commodities. U.S. crude inventories plunged 7.4 million barrels last week, the biggest drop since September 2008, according to an American Petroleum Institute report yesterday.

The Fed said Nov. 3 it will buy an additional $600 billion of Treasuries through June to spur the economy. Investors should have an “overweight allocation” on commodities because this policy, along with the global recovery, is positive for prices, according to Goldman.......Read the entire article.

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Crude Oil Technical Outlook For Wednesday Morning Nov. 10th

Crude oil was lower due to profit taking overnight as it consolidates some of the rally off August's low. Stochastics and the RSI are overbought and are turning neutral to bearish hinting that a short term top might be in or is near.

Closes below the 20 day moving average crossing at 83.49 are needed to confirm that a short term top has been posted. If December extends the aforementioned rally, the 75% retracement level of May's decline crossing at 88.07 is the next upside target.

First resistance is Tuesday's high crossing at 87.63
Second resistance is the 75% retracement level of May's decline crossing at 88.07

Crude oil pivot point for Wednesday morning is 86.61

First support is the 10 day moving average crossing at 84.88
Second support is the 20 day moving average crossing at 83.49

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Tuesday, November 9, 2010

Commodity Corner: Crude Oil Ends 6 Day Rally

Tuesday's crude futures ended a six day rally Tuesday, as the dollar strengthened against the euro. Crude reached a two year high of $87.63 earlier in the day, before ending Tuesday's trading session at $86.72 a barrel, a 34 cent drop. Oil bottomed out at $85.48. The euro strengthened and the dollar weakened earlier Tuesday following the sale of Greek Treasury bills. The greenback later rebounded amid concerns of European governments struggling to pay their debt. A stronger dollar causes dollar-denominated commodities to be more expensive for countries with other currencies.

Led by financial and consumer companies, the Standard & Poor's 500 Index declined 4.17 points, or 0.3 percent, while the ICE Dollar Index rose to 77.03 from 77.44. Meanwhile, front month natural gas prices increased to its highest levels since August 19, as heating fuel demand rose on cold weather anticipation. Forecasts showed below average temperatures across the U.S. from Nov. 14 to Nov. 22, as reported by the National Weather Service. Henry Hub natural gas rose 12.2 cents to settle at $4.21 per thousand cubic feet on the New York Mercantile Exchange.

According to the Energy Information Administration's (EIA) report, 2010 U.S. natural gas production should increase 2.5 percent from 2009 levels and 0.2 bcf a day for October's marketed natural gas production. The intraday range for natural gas was $4.06 to $4.23. RBOB gasoline for December contract also settled up Tuesday, adding 0.65 cent, to $2.19 a gallon the highest since Aug. 3. Gasoline prices fluctuated between $2.16 and $2.20 Tuesday.

Courtesy of Rigzone.Com

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