Commodity Corner: Crude Oil Down, Natural Gas Up for the Week

Crude oil settled at $81.51 a barrel Friday, a 34 cent decline from the previous day, as traders responded to action taken by the Chinese government to address rising inflation.

China's government, which many thought would raise interest rates to quell inflation, decided to take a somewhat milder approach Friday: increasing the required reserve replacement ratio for banks. Although less dramatic than the former approach, the move is expected to have a dampening effect on demand for oil and other commodities.

Also on the minds of traders was pending action by the Irish government, which faces a serious debt crisis brought on by a real estate bust. Ireland's prime minister on Friday confirmed the government was holding talks with the EU and the International Monetary Fund to craft a bank bailout plan to help stabilize the country's banks. The increasing likelihood of an Irish bank bailout has helped the euro to regain strength against the dollar recently. However, a weaker dollar was not enough to carry oil into positive territory for Friday.

December crude traded within a range from $80.59 to $82.75 Friday. Beginning with Monday's settlement price of $84.86, oil is down 3.9 percent for the week.

For natural gas, the story has been quite different. December gas futures surged 8.2 percent during the week, thanks to colder weather conditions taking hold in much of the country and forecast to continue through the Thanksgiving holiday.

Natural gas gained 15 cents Friday to settle at $4.16 per thousand cubic feet. It peaked at $4.17 and bottomed out at $3.975.

Gasoline for December delivery fell three cents to settle at $2.20 a gallon Friday. The futures price fluctuated from $2.16 to $2.25. Gasoline is virtually flat for the week, having risen only 0.2 percent since Monday.

Posted courtesy of Rigzone.Com

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Stock Market and Commodities Commentary For Friday Evening Nov. 19th

The S&P 500 index closed higher on Friday as it extends Thursday's rally. The high range close sets the stage for a steady to higher opening on Monday. Stochastics and the RSI are turning neutral to bullish signaling that a short term low might be in or is near. Closes above the 10 day moving average crossing at 1199.63 would temper the near term bearish outlook. If December extends the decline off last week's high, the 25% retracement level of the July-November rally crossing at 1169.37 is the next downside target. First resistance is the 10 day moving average crossing at 1199.63. Second resistance is this month's high crossing at 1224.50. First support is Tuesday's low crossing at 1175.20. Second support is the 25% retracement level of the July-November rally crossing at 1169.37.

Crude oil closed lower on Friday but remains above the 50% retracement level of the August-November rally crossing at 80.49. The mid-range close sets the stage for a steady opening on Monday. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term. If December extends the decline off last week's high, the 62% retracement level of the August-November rally crossing at 78.56 is the next downside target. Closes above the 10 day moving average crossing at 84.51 are needed to confirm that a short term low has been posted. First resistance is the 20 day moving average crossing at 84.03. Second resistance is the 10 day moving average crossing at 84.51. First support is Wednesday's low crossing at 80.06. Second support is the 62% retracement level of the August-November rally crossing at 78.56.

Natural gas closed higher on Friday as it extends this week's rally. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near term. If December renews 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 the reaction low crossing at 3.743 are needed to confirm that a short term top has been posted. First resistance is last Wednesday'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 Monday's low crossing at 3.710. Second support is the reaction low crossing at 3.500.

Gold closed lower on Friday and the mid-range close sets the stage for a steady opening on Monday. Stochastics and the RSI remain bearish signaling that sideways to lower prices is possible near term. If December extends the decline off last week's high, the reaction low crossing at 1315.60 is the next downside target. Closes above the 10 day moving average crossing at 1372.90 would temper the near term bearish outlook. First resistance is the 20 day moving average crossing at 1362.70. Second resistance is the 10 day moving average crossing at 1372.90. First support is Tuesday's low crossing at 1329.00. Second support is the reaction low crossing at 1315.60.

The U.S. Dollar closed lower due to profit taking on Friday as it consolidates some of this month's rally. The mid-range close sets the stage for a steady to lower opening on Monday. 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 77.79 are needed to confirm that a short term top has been posted. If December extends this month's rally, the 38% retracement level of this year's decline crossing at 80.54 is the next upside target. First resistance is Tuesday's high crossing at 79.59. Second resistance is the 38% retracement level of this year's decline crossing at 80.54. First support is the 20 day moving average crossing at 77.79. Second support is this month's low crossing at 75.24.


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Energy Sector Buzz: China North East Petroleum Down In Late Trading

China North East Petroleum reported third quarter results that fell well short of the one analyst estimate on Thomson Reuters. Total oil production plunged 40% on severe flooding. The oilfield services company also said it's working on improving its control environment and has engaged an outside firm to help with it's restatement process. Shares slipped 4.9% to $6.60 in after hours trading.

Exploration and production company Gastar Exploration Ltd. (GST, $4.64, +$0.35, +8.16%) said it has acquired about 59,000 net acres of leasehold in the Marcellus Shale, a natural gas rich rock formation. Terms of the acquisition, which is expected to close in mid-December, weren't disclosed.

Goldman Sachs started coverage on oil service provider RPC Inc. (RES, $26.97, -$1.53, -5.37%) with a sell rating, saying the market for U.S. pressure pumping remains very tight, stocks are near all time highs and Street estimates imply that the cycle goes through 2012.

Northern Oil and Gas Inc. (NOG, $22.07, +$1.29, +6.21%) boosted the size of its planned stock sale as the offering priced at a mere 2.6% discount to Thursday's close.



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The Chinese moved to increase interest rates and Big Ben Bernanke struck back defending quantitative easing and bashing the Chinese. Ben forced the issue with QE2 and now the Chinese are forced to raise rates! Now the question is will the Chinese rate hikes keep coming or will it be too little too late to cool their hot inflation? Right now I would say it’s bordering on too little too late. Ben Bernanke lashed out at China saying they are causing global problems by preventing their currency from strengthening while their economy booms.

It’s just like what I said in my article in the upcoming issue of SFO Magazine when I wrote, “The Fed felt it had no choice (but to print more money,QE2) as the U.S. government moved slow to attack a rising budget deficit and at the same time face an imbalance as the Chinese continue to manipulate their currency." Chinese currency manipulation may help them in the short run yet it could sow the seeds of economic problems in the future.

The Chinese may feel that they have to cheat the world to be successful by controlling their currency but the truth is that if they want to maintain their meteoric economic growth over the long run they would be better served by allowing the market, not the government, to moderate their economy. Chinese currency manipulation is creating a bubble that will burst if they make a misstep, causing major pain the future. Right now that may be hard to imagine as everyone on the globe is so bullish on China yet the recent correction and history is a reminder that things can......Read the entire article.


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Brad Zigler: Is Crude Oil Taking Lessons From Gold?

Commodity prices sold off hard this week as concerns over credit tightening in the Chinese market prompted traders and investors to rethink their inflation notions. Unexpectedly, in October, year over year inflation on the Chinese mainland rose to 4.4 percent, prompting authorities to jawbone a jack up of interest rates and price controls.

Gold prices tumbled from the $1,400/oz level reached after a nearly unabated three month rise. Industrial commodities also took it on the chin, as fears of slowing growth in China percolated.
But the most industrial of commodities is, of course, oil. Oil had rallied in autumn along with gold, albeit with greater volatility, and with punier returns as well. Gold chugged uphill from July's end to a 14.8 percent gain ahead of the November election. Simultaneously, oil pitched and rolled 3.2 percent higher.

The wheels on the commodity undercarriage started wobbling after the votes were tallied and, more importantly, once the Fed laid out the parameters of its second tranche of quantitative easing. Then oil and gold both tumbled. Gold led the way down, just as it had led the way up. Since the top of November, bullion's slumped 1.7 percent, while front month WTI crude prices have slid 1.3 percent.

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When this action is over look for the longer term positive trend to resume. Be sure to trade this uptrend with tight money management stops.

Based on a pre-defined weighted trend formula for chart analysis, XOM scored +85 on a scale from -100 (strong downtrend) to +100 (strong uptrend):

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+30......New 3 Month High in November
+85......Total Score

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Crude Oil Daily Technical Outlook For Friday Morning Nov. 19th

Crude oil was higher due to short covering overnight as it consolidates some of the decline off last week's high. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term.

If December extends the aforementioned decline, the 62% retracement level of the August-November rally crossing at 78.56 is the next downside target. Closes above the 10 day moving average crossing at 84.57 would confirm that a short term low has been posted.

First resistance is the 20 day moving average crossing at 84.06
Second resistance is the 10 day moving average crossing at 84.57

Crude oil pivot point for Friday morning is 82.09

First support is Wednesday's low crossing at 80.06
Second support is the 62% retracement level of the August-November rally crossing at 78.56


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