Demand Concerns, European Debt Crisis Continue to Pressure Oil Bulls

Negative statements on future oil demand estimations by OPEC Secretary-General Abdalla El-Badri and remarks from European finance ministers that they are ruling out the use of stimulus measures to combat the European debt crisis had crude oil trading much lower in Sunday evenings overnight trading session. Stochastics and the RSI remain overbought, diverging and are turning neutral to bearish hinting that sideways to lower prices are possible near term.

Closes below last Monday's low crossing at 85.17 would confirm that the corrective rally off August's low has ended while opening the door for a possible test of August's low crossing at 76.61 later this fall. If November extends the rally off August's low, the May-July downtrend line crossing near 91.81 is the next upside target.

First resistance is last Tuesday's high crossing at 90.60. Second resistance is the May-July downtrend line crossing near 91.81. First support is last Monday's low crossing at 85.17. Second support is the reaction low crossing at 83.47. Crude oil pivot point for Monday morning is 88.47.


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CFTC Commitments of Traders (COT) Reports For August 2011

NYMEX WTI Crude Oil
Crude Oil futures open interest fell 0.8 percent in August. Commercial participants, who accounted for 53.6 percent of open interest, held net short positions; they increased their long positions by 1.4 percent and decreased their short positions by 2.2 percent. Non-commercial participants, who accounted for 41.6 percent of open interest, held net long positions. They decreased their long positions by 2.0 percent and decreased their short positions by 1.4 percent. Non-reportable participants, who accounted for 4.8 percent of total open interest, held net long positions; they decreased their long positions by 9.4 percent and increased their short positions by 30.2 percent.

NYMEX Henry Hub Natural Gas
Natural gas futures open interest increased 2.5 percent in August. Commercial participants, who accounted for 34.9 percent of open interest, held net long positions; they increased their long positions by 10.2 percent and increased their short positions by 9.5 percent. Non-commercial participants, who accounted for 58.9 percent of open interest, held net short positions. They decreased their long positions by 1.4 percent and decreased their short positions by 0.3 percent. Non-reportable participants, who accounted for 6.3 percent of total open interest, held net long positions; they decreased their long positions by 8.8 percent and increased their short positions by 7.3 percent.

NYMEX Heating Oil 
Heating oil futures open interest fell 0.8 percent in August. Commercial participants, who accounted for 66.8 percent of open interest, held net short positions; they increased their long positions by 7.4 percent and decreased their short positions by 2.2 percent. Non-commercial participants, who accounted for 23.3 percent of open interest, held net long positions. They decreased their long positions by 13.2 percent and increased their short positions by 5.8 percent. Non-reportable participants, who accounted for 9.9 percent of total open interest, held net long positions; they decreased their long positions by 8.3 percent and
decreased their short positions by 3.3 percent.

NYMEX RBOB Gasoline
Gasoline futures open interest fell 2.6 percent in August. Commercial participants, who accounted for 63.8 percent of open interest, held net short positions; they increased their long positions by 4.2 percent and decreased their short positions by 8.5 percent. Non-commercial participants, who accounted for 30.0 percent of open interest, held net long positions. They decreased their long positions by 5.5 percent and increased their short positions by 29.5 percent. Non-reportable participants, who accounted for 6.2 percent of total open interest, held net long positions; they decreased their long positions by 25.2 percent and decreased their short positions by 5.9 percent.

EIA: Over 90% of Syrian Crude Oil Exports go to European Countries

Source: U.S. Energy Information Administration, Syria Country Analysis Brief.

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Syria, the only significant crude oil-producing country in the eastern Mediterranean, produced 387,000 barrels per day (bbl/d) of crude oil (including lease condensate) in 2010. Estimated net crude oil exports were 109,000 bbl/d in 2010, the vast majority of which went to OECD European countries. Germany, Italy, France, and the Netherlands comprised over 80% of Syria's crude oil exports.

According to the European Commission, European Union (EU) countries imported 1.35% of their petroleum from Syria in 2010. Although exports from Syria represented a small share of the EU's overall oil needs, these exports accounted for 30% (or $4.1 billion) of Syrian government revenues in 2010.

Declining oil production has been the main driver of lower Syrian oil exports (see chart below). Efforts to reverse the declining trend for production and exports by expanding exploration and production through partnerships with foreign oil companies have been hampered by U.S. sanctions.

Source: U.S. Energy Information Administration, Syria Country Analysis Brief.
Download CSV Data

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Recent political unrest in Syria and the indiscriminate use of deadly force against dissent by the Syrian government has prompted further U.S. sanctions, including a ban on the import of crude oil or petroleum products of Syrian origins. On September 2, 2011, the EU, whose members purchase over 90% of Syrian oil, announced a ban on imports of Syrian crude oil, which may further hinder Syrian efforts to expand their petroleum industry.

Syria has opened its offshore territory for development; however, this region is expected to contain mostly natural gas. The Syrian Ministry of Petroleum and Mineral Resources and General Establishment of Geology and Mineral Resources has also opened up bidding for shale oil deposits containing an estimated 285 billion barrels of oil. This new exploration, plus rehabilitation of current oil fields, may help counter the current decline in petroleum production.

Although Syria is not a major producer of oil and gas, it occupies a strategic location in terms of prospective energy transit routes and regional security. EIA's Country Analysis Brief on Syria features additional analysis on these trends, along with a broad discussion of Syria's energy sector.

Oil N Gold: Crude Oil and Gold Weekly Technical Outlook

Here is your weekend Technical outlook for crude oil and gold from the traders at Oil N Gold. Com......



Crude Oil
Crude oil's corrective rise from 75.71 extended further last week but struggled to take out 55 days EMA. Also strong resistance around 90 psychological level. While such correction might extend, current development suggests that it should be to completion and rise attempts should be limited by near term falling trend line resistance (now at 92.3). A break of 85.00 minor support will be the first signal of resumption of fall from 114.83 and should turn bias to the downside for retesting 75.71 low first.

In the bigger picture, medium term rebound from 33.2 is treated as the second leg of consolidation pattern from 147.24 and should have finished at 114.83 already. Current decline should target next key cluster support at 64.23 (61.8% retracement of 33.2 to 114.83 at 64.38) next. Sustained break will pave the way to retest 33.2 low. However, break of 100.62 resistance will indicate that fall from 114.83 has completed after meeting missing 100% projection target. The corrective structure of such decline in turn argues that rise from 33.2 is still in progress for another high above 114.83.

In the long term picture, crude oil is in a long term consolidation pattern from 147.27, with first wave completed at 33.2, second wave might be finished. Upon confirmation of medium term reversal, the third wave of the pattern should have started for a retest on 33.2 low.

Gold
Gold's choppy fall from 1923.7 extended to as low as 1765.4 last week and there is no sign of completion yet. Such decline is either consolidation to rise from 1705.4 or the third leg of the consolidation pattern from 1917.9. In either case, more choppy trading would still be seen in range of 1705.4/1923.7. But in case of deeper fall, we'd expect strong support above 1705.4 to contain downside and bring up trend resumption. Above 1923.7 should in turn send gold towards 61.8% projection of 1478.3 to 1917.9 from 1705.4 at 1977.1.

In the bigger picture, firstly, gold's long term up trend is still intact and there is no signal of reversal yet. Another record high should still be seen. But we'll be cautious on another near term reversal near to 2000 psychological level and finally bring some lengthier consolidation. Meanwhile, a break of 1705.4 will argue that gold has indeed topped out with a double top reversal pattern (1917.9, 1923.7) and in such case, deeper pull back could be seen back towards resistance turned 1577.4 support instead.

In the long term picture, rise from 681 is treated as resumption of the long term up trend from 1999 low of 253 and there is no sign of topping yet. Current up trend could now be targeting 161.8% projection of 253 to 1033.9 from 681 at 1945.6. Sustained trading above 2000 psychological level should pave the way to 261.8% projection at 2727.2.

The Battle Continues Between the Bulls and the Bears

The battle between the Bulls and Bears continues in the equity markets. This past week the Bulls won with a very positive 5.35% return.

Out of the 6 markets that we track, only two closed with a positive gain for the week and they were the S&P 500 index and crude oil. We consider both of these moves counter trend rally’s. Both the silver and gold markets lost ground last week, with silver closing down 1.89% and gold dropping 2.36%.

The Dollar Index saw some profit taking and closed down .85% for the week.
The Reuters/Jefferies CRB Commodity Index also came under pressure and closed down 1.38% in line with the general trend.

Let’s go take a look at the markets and see how we can preserve and protect and grow your capital in 2011.

S&P 500 Change for the week: + 5.35%
Monthly Trade Triangles for Long Term Trends: = Negative
Weekly Trade Triangles for Intermediate Term Trends: = Positive
Daily Trade Triangles for Short Term Trends: = Positive
Combined Strength of Trend Score: = + 70

Silver Change for the week: – 1.89%
Monthly Trade Triangles for Long Term Trends: = Positive
Weekly Trade Triangles for Intermediate Term Trends: = Positive
Daily Trade Triangles for Short Term Trends: = Negative
Combined Strength of Trend Score: = + 65

Gold Change for the week: – 2.36%
Monthly Trade Triangles for Long Term Trends: = Positive
Weekly Trade Triangles for Intermediate Term Trends: = Positive
Daily Trade Triangles for Short Term Trends: = Negative
Combined Strength of Trend Score: = + 65

Crude Oil Change for the week: + .91%
Monthly Trade Triangles for Long Term Trends: = Negative
Weekly Trade Triangles for Intermediate Term Trends: = Positive
Daily Trade Triangles for Short Term Trends: = Negative
Combined Strength of Trend Score: = + 55

Dollar Index Change for the week: – .85%
Monthly Trade Triangles for Long Term Trends: = Positive
Weekly Trade Triangles for Intermediate Term Trends: = Positive
Daily Trade Triangles for Short Term Trends: = Negative
Combined Strength of Trend Score: = + 75

CRB Index Change for the week: – 1.38%
Monthly Trade Triangles for Long Term Trends: = Negative
Weekly Trade Triangles for Intermediate Term Trends: = Positive
Daily Trade Triangles for Short Term Trends: = Negative
Combined Strength of Trend Score: = – 75

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Brent Crude Dips After Platts Changes Formula

US benchmark crude contracts fell on concerns that the economic recovery in the US is slowing, while Brent crude was on the rise in London as the outlook for the European debt crisis brightened. However, the trends changed late in the week as Brent fell after Platts decided to change the way it calculates the benchmark price. Oil futures on the New York Mercantile Exchange (NYMEX) were hit by a slew of downbeat US data that came out late in the week. Thursday’s employment report from the US Labor Department revealed s surprise increase in US jobless claims to 428,000 last week.

Manufacturing data that was released on the same day also disappointed, showing a decline in the Empire State index from minus-7.7 in August to minus-8.8 in September, while the Philly Fed rose 13.2 to minus-17.5 in September, but still missed expectations. In the meantime, Brent contracts were on the rise, enjoying support from reassuring statements from European politicians that Greece will not quit the euro zone and the EU will go as far as necessary to prevent it from going into a default.

Demand for Brent was also supported by lingering concerns over supplies from the North Sea following a series of delays over the past few weeks. However, Brent futures fell sharply late on Friday after Platts, the energy information arm of McGraw Hill, said it will change the Brent crude pricing formula sooner than expected. The changes to the benchmark that is used to price two third of the world’s oil will come into effect in January 2012 instead of the first quarter of 2013 as was planned before.

Platts has decided to change the pricing benchmark due to a reduction in Brent crude supplies in recent years, which has made it easier for traders to manipulate the market. The Brent crude prices will now be assessed based on contracts signed over a 16 day period instead of the previous 12 day span. “Recent events in the market, including disruptions to the Forties pipeline system and shortfalls in cargo deliveries, show clearly that timely action is needed to maintain the strength of the physical benchmark,” said vice president of editorial at Platts Dan Tanz.


Posted courtesy of Pro Active Investors

Zacks: Kinder Morgan-Valero Pipeline Pact

Leading petroleum product pipeline owner and operator Kinder Morgan Energy Partners L.P (KMP) has partnered with San Antonio based Valero Energy Corporation (VLO) to build a new 136 mile, 16 inch pipeline to transport gasoline, jet fuel and diesel. Known as Parkway Pipeline LLC, the proposed initiative is estimated to cost $220 million.

While both companies will own the pipeline system, Kinder Morgan will be the operator. Parkway Pipeline is expected to have an initial capacity of 110,000 barrels per day that can be eventually expanded to over 200,000 bpd.

The refined products would be shipped from refineries in Norco, Louisiana to the Collins, Mississippi hub, owned by a subsidiary of Kinder Morgan, Plantation Pipe Line Company. Kinder Morgan has a 51% stake in the petroleum transportation hub of which it is also the operator. Thereafter, the refined petroleum products will be distributed by the pipeline systems, including Plantation, to important markets in the southeastern United States from this hub.

The pipeline is expected to begin operations by mid 2013 after getting approvals from the concerned environmental and regulatory authorities. It is expected to be accretive for Kinder Morgan unitholders upon completion as the project has a long-term backing of a credit worthy shipper.

To curtail environmental impacts, Parkway Pipeline construction will follow prevailing utility rights of way wherever possible. The project is expected to boost fuel supply, and at the same time offer all shippers larger access to Gulf Coast refineries.

Kinder Morgan’s continuous effort to upgrade its portfolio is evident from its newest business segment, Trans Mountain Pipeline (now under Kinder Morgan Canada), an approximately 715 mile transport system overbooked by a wide margin for September. Trans Mountain has a pipeline capacity of approximately 300,000 barrels per day.

P{osted courtesy of Zacks on Seeking Alpha. Kinder Morgan holds a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months. For the long term, we maintain a Neutral rating on the stock.

Phil Flynn: Prime The Pump And Bailout The Brent

Oh sure, now you go and bail out Europe and drive the Brent Crude versus West Texas Intermediate spread back above $25 wide! Brent crude gets pumped up as global central bank pumps dollar liquidity in to European banks. The reduced risk of bank default and kicking the Greece default can further down the road had the Brent crude supply demand fundamentals tightened in a minute.

The decision of the five largest central banks to dump dollars into European banks added to the support for oil but created fears of a tightness of supply in the Brent. Weak production from the North Sea and conflicting reports on the return of Libyan crude seems to be adding to the Brent woes. There is some short term confidence coming out of the Euro zone and this will increase demand or at least expectations of demand almost instantly.


The spread between Brent crude and West Texas had previously come in, especially after U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum reserve) fell by 6.7 million barrels which put US supply at 346.4 million barrels which is still well above the five year average.


Robert Campbell of Reuters News says writes, "Looking back at the impact of the Libyan civil war on the oil market the most remarkable fact is that the situation did not lead to an oil super-spike. After all, a scramble for sweet crude in 2007 is widely seen as the trigger for the spiral in oil prices until they hit nearly $150 a barrel. Although the data are still coming in, it would appear that the Atlantic basin refining sector is now more flexible, in part due to weaker demand and in part due to investments in new capacity. Sweet refiners may be suffering because of high crude costs, but the system as a whole is not breaking down."

He goes on to say, "The resilience of the market is all the more impressive once the other supply disruptions to the European short haul sweet crude market are considered. Normal decline of the aging fields in the North Sea is well known, as is the extraordinary sequence of problems at several important production facilities in the area. Less discussed is the reduction in crude oil production in Azerbaijan, an important supplier of very low sulfur crude.

Combined with the conflict in Libya a huge amount of sweet crude oil production was lost to European refiners, many of which rely on short haul cargoes. In the first half of the year sweet crude output from Azerbaijan, Britain, Libya and Norway was 215 million barrels less than in 2010. With this number in mind, the response of the International Energy Agency to the crisis.....a release of 60 million barrels of strategic stocks, seems almost timid. Doubtless, the IEA would argue that the problems in Azerbaijan, Britain and Norway were not the classic supply disruptions the agency is meant to guard against."


Posted courtesy of Phil Flynn and PFGs Best. You can contact Phil at 800-935-6487 or email him at pflynn@pfgbest.com. Get the "Power to Prosper" by tuning into the Fox Business Network where you can see Phil every day!

Crude Oil Pressured By Euro Weakness and Greek Bailout Doubts

Crude oil was slightly lower in overnight trading as the euro has stalled in it's advance against the dollar on worries that an agreement to bail out Greece may be held up by a number of countries. Stochastics and RSI ifor WTI oil remain overbought. If November extends the rebound off August's low, the May-July downtrend line crossing near 92.13 is the next upside target.

Closes below Monday's low crossing at 85.17 would confirm that the corrective rally off August's low has ended while opening the door for a possible test of August's low crossing at 76.61 later this fall.

First resistance is Tuesday's high crossing at 90.60. Second resistance is the May-July downtrend line crossing near 92.13. First support is Monday's low crossing at 85.17. Second support is last Tuesday's low crossing at 83.47. Crude oil pivot point for Friday morning is 89.19.

EIA: Key Factors Affecting the Outlook for Restoring Libya's Oil Production

As the fighting in Libya begins to wind down and the Transitional National Council (TNC) establishes itself as the internationally recognized government, it is timely to review the many factors that will affect the pace and timing of the restart of the Libyan oil industry.

The TNC leadership, which views oil revenues as a means to rebuilding the country, and participants in world oil markets, who continue to grapple with tightness in the global supply of high quality crude, share a common interest in restoring Libya's oil production and exports. When this will happen is uncertain and depends to a significant extent on the political, military, and security situation that will determine when companies can return to oil fields to repair and/or restart production. It is also worth noting that at the time of writing, only the European Union and United Nations had lifted sanctions on Libya; U.S. sanctions remain in place.

Opinions vary across analysts. Some predict a slow and protracted recovery, while others are more optimistic, pointing to TNC statements on its commitment to restarting oil production. Most international oil companies (IOCs) have been cautious regarding their public statements on resuming production.

Political and military outcomes will each play an important role in creating conditions that speed or retard production activity. Politically, there must be sufficient legitimacy and legal clarity to allow for financing activity and exchanges of funds. A recognized government with the institutions in place to uphold contracts and manage revenues will be necessary for the IOCs to return. While the TNC has stated that it will respect existing contracts, IOCs seeking to purchase oil from Libya or invest in the country's oil sector must be able to identify their institutional and financial counterparts within the new regime.

One question to be addressed is whether oil revenues should be paid to the national oil company, to the oil ministry, or to other parties. Another option might be to allocate funds to an escrow account pending clarification of future arrangements so that operations can resume. IOCs also need to consider that the government and its institutions are likely to continue to evolve over time.

Militarily, remnants of the conflict may also continue to present challenges. As of this writing, Gaddafi loyalists are still in control of a few areas of the country and some analysts believe that pockets of resistance will remain even after the fighting has come to an end. Beyond the military conflict, security concerns could delay the return of oil workers and the resumption of production. While the oil industry is not very labor-intensive, a large part of the labor employed in the sector is highly specialized, and, in many cases, comprises expatriates who are likely to have found employment elsewhere. The conflict also scattered the Libyan workforce. It will take time to reassemble the staff, and even then there is a risk that the aftermath of the conflict could affect workforce morale and cohesion as employees face up to their differing roles and loyalties before and during the fighting.

Some of the security concerns are directly tied to the oil infrastructure (Figure 1). For instance, Gulf of Sirte, an area that accounts for about two thirds of Libyan oil production, saw the heaviest fighting and the most damage and is likely to face continuing security concerns. In terms of security, press reports suggest that the oil terminals and surrounding infrastructure of Ras Lanuf and Brega have been booby trapped with explosive devices.

Figure 1

The Financial Times cited land mine experts as saying it could take 18 months to clear some of the explosives, an issue that will need to be addressed before the known damage can be fully repaired. Resuming production will bring with it its own security concerns as the infrastructure is a relatively easy target. During the conflict, oil production out of the east was sporadic at times because when production resumed, it became a target for loyalist forces.

Read the entire article at www.eia.gov