ONG: Weekly Fundamentals..... Geopolitical Tensions Drive Crude Oil Volatility

Geopolitical tensions have been directing the movement of oil prices since the start of the year. Sanctions against Iran in condemnation of its nuclear developments had sent oil prices higher. The US has imposed sanctions against Iran's central bank and it's highly likely that Japan and South Korea will reduce their imports of Iranian oil. The EU has in principle agreed ton an embargo on oil imports. 

However, an EU embargo on Iranian oil imports will likely be delayed for 6 months so that countries including Greece, Italy and Spain can find alternative supplies. Data from the European Commission indicated that these three countries accounted for 68.5% of EU imports from Iran in 2010. The news triggered a sharp selloff in oil prices on Thursday and Friday. In Nigeria, President Goodluck Jonathan will meet protesters in an attempt to end the 4 day strike which will affect the oil industry. Oil prices should continue to move with great volatility in coming months as long as geopolitical tensions remain uncertain.

The DOE/EIA released its monthly short-term energy report last week, suggesting the price of WTI crude oil would average about 100/bbl in 2012, up +5/bbl from the average price last year. For 2013, the agency expects WTI prices to 'continue to rise, reaching 106/bbl per barrel in the fourth quarter of next year". Concerning global oil demand/supply, the DOE/EIA expects the tightening of world oil markets would 'moderate in 2012 and resume in 2013'.

Oil demand will probably increase +1.27 mmb, or +1.44% y/y, to 89.38 mmb in 2012. This, however, represents a -0.14 mmb drop from the projection made in December. The DOE/EIA also introduced the demand forecast for 2013. During the year, consumption will climb +1.47 mmb, or +1.44% y/y, to 90.85 mmb. On the supply side, non-OPEC supply is expected to rise +0.91 mmb, or +1.76%, y/y to 52.76 mmb in 2012, followed by a +0.76 mmb, or +1.44%, increase to 53.52 mmb in 2013. The need for oil supply from the OPEC will be 30.30 mmb and 30.76 mmb in 2012 and 2013 respectively.

Here's more from ONG on natural gas, rig counts, gold and more!

Is This Pullback in Crude Oil a Buying Opportunity?

February crude oil closed lower on Friday as it extended yesterday's breakout below the 20 day moving average crossing at 99.40. The mid range close sets the stage for a steady opening on Tuesday. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term. If February extends this week's decline, December's low crossing at 92.70 is the next downside target.

If February renews the rally off December's low, the 75% retracement level of the 2011 decline crossing at 104.84 is the next upside target. First resistance is last Wednesday's high crossing at 103.74. Second resistance is the 75% retracement level of the 2011 decline crossing at 104.84. First support is today's low crossing at 97.70. Second support is December's low crossing at 92.70.

The pullback in the crude oil market is setting up a buying opportunity once the downward momentum is over. A solid close over the $104 level is needed to drive this market to the $120 level. External world events can trigger moves in this commodity. With a Chart Analysis Score of +55, this market is now in a trading range. The crude oil market has major resistance at $104 and support at $97. Long and intermediate term traders should be long this market with appropriate money management stops.

Get our current Market Trend Forecasts

Rigzone: Crude Oil Falls As Euro Zone Woes Resurface

Crude futures fell Friday in tandem with a slumping euro as Standard & Poor's prepared to downgrade France's credit rating, adding new fears about Europe's economy.

The ratings service notified the French government and other European governments that it will lower their debt ratings, according to reports Friday, sending the euro to 16 month lows against the dollar and taking the wind out of riskier assets such as oil, stocks and other commodities.

The news of imminent downgrades renewed worries about a potential stumbling block for the global economy, and oil demand. Traders quickly switched gears to focus on Europe's credit crisis after a sell-off Thursday was sparked by potential delays to the E.U. embargo on Iranian oil.....Read the entire Rigzone article.

Phil Flynn: To Embargo or not to Embargo, That is Indeed the Question

While the market got a boost on reports that European refiners were meeting with Saudi Arabia and other oil producers and securing an alternative to Iranian oil supply, apparently some in the EU did not like the answers that they heard. An overbought oil market seemingly got a reason to sell-off on a Bloomberg report that the European Union embargo on imports of Iranian oil will likely be delayed for six months to allow countries such as Greece, Italy and Spain to find alternative supply, quoting an EU official with knowledge of the talks and it hit the market at just the right time.

The truth is, as I have said before, the EU would like to put off an embargo until after winter and Italy still wants some of the money that the Iranians owe them. Still do not think that Iran will be able to sell their oil very easily. The bottom line is that all Iranian oil will be sold, but it will be sold at a discount. Is it any wonder that Iran is rattling that saber to keep prices high. They are hopping if they can keep prices artificially high they won't miss the loss of revenue! Which means it will be a saber rattling kind of weekend! With a three day holiday in the US, being short over the weekend might be a dangerous propostion.
Yet Bloomberg News is reporting that.....Read the entire article.

Candlestick Formations You Need To Learn

ONG: Sharp Move Dominates Oil Market, Bears Take the Momentum

Sharp moves dominated yesterday's session, where oil rallied to acquire our targeted area near 103.00 before reversing sharply again to breach the bearish technical pattern shown on image in addition to 100.10 support. Currently, price is testing the breached level again which turns into resistance after testing the main pivotal support at 98.50, but in general, trading remain within the same ranging stance. Today we may see another downside attempt as important technical levels were breached yesterday. The trading range for the day is expected among the major support at 96.00 and the major resistance at 102.00. The short term trend is to the downside with steady daily closing below 105.00, targeting 65.00. Daily Pivot Points     Normal Range     Last Bar Commodity Chart S3 S2 S1 PP R1 R2 R3 H L C Crude Oil 92.93 95.71 97.41 100.19 101.89 104.67 106.37 102.98 98.50 99.10 Natural Gas 2.540 2.602 2.649 2.711 2.758 2.820 2.867 2.772 2.663 2.697 Heating Oil 2.9200 2.9798 3.0169 3.0767 3.1138 3.1736 3.2107 3.1364 3.0395 3.0541 Gasoline RBOB 2.5845 2.6512 2.6912 2.7579 2.7979 2.8646 2.9046 2.8245 2.7178 2.7313 Gold 1616.1 1628.5 1638.1 1650.5 1660.1 1672.5 1682.1 1662.9 1640.9 1647.7 Silver 28.966 29.418 29.771 30.223 30.576 31.028 31.381 30.675 29.870 30.124 Copper 3.4080 3.4650 3.5570 3.6140 3.7060 3.7630 3.8550 3.6710 3.5220 3.6490 Platinum 1468.7 1480.0 1490.0 1501.3 1511.3 1522.6 1532.6 1512.5 1491.2 1500.1       Extreme Range         Posted courtesy of Oil N' Gold

Could Crude Oil Prices Intensify a Pending SP 500 Sell Off?

Crude Oil Bulls Lose Momentum on Sharp Drop

Crude oil closed sharply lower on Thursday and below the 20 day moving average crossing at 99.21 confirming that a short term top has been posted. The low range close sets the stage for a steady to lower opening on Friday. Stochastics and the RSI have turned bearish signaling that sideways to lower prices are possible near term. If February extends today's decline, the reaction low crossing at 98.30 is the next downside target.

If February renews the rally off December's low, the 75% retracement level of the 2011 decline crossing at 104.84 is the next upside target. First resistance is last Wednesday's high crossing at 103.74. Second resistance is the 75% retracement level of the 2011 decline crossing at 104.84. First support is the reaction low crossing at 98.30. Second support is December's low crossing at 92.70.

Get a FREE Preview of INO TV....The Leader in Trader Education

Crude Oil Moves into Positive Territory on all Trade Triangles

The crude oil market continues to consolidate over the $100 level. With all of our Trade Triangles in a positive mode we are looking for this market to move higher. A solid close over the $104 is needed to drive this market to the $120 level. External world events can trigger moves in this commodity. With a Chart Analysis Score of +90 this market remains in a strong trend to the upside. The crude oil market has resistance starting at $104. Long and intermediate term traders should be long this market with appropriate money management stops.

Get Our Free Weekly Low Risk Stock Picks

EIA: Brent Crude Oil Averages Over $100 Per Barrel in 2011

Source: U.S. Energy Information Administration, based on Thomson Reuters.
Note: Brent is the underlying crude oil for the light sweet crude oil futures contracts on the Intercontinental Exchange (ICE). West Texas Intermediate (WTI) represents the spot price for crude oil at Cushing, Oklahoma, the physical delivery hub for NYMEX light sweet crude oil futures contracts.

The crude oil markets sustained high price levels in 2011, as the spot price of Brent averaged $111.26 per barrel, marking the first time the global benchmark averaged more than $100 per barrel for a year (see chart above). The West Texas Intermediate (WTI) crude oil price averaged $94.87 per barrel, up $15 per barrel from 2010, reflecting a discount to the Brent crude oil price due to transportation bottlenecks near Cushing, Oklahoma, the physical delivery hub for NYMEX light sweet crude oil futures contracts.

The price increases in 2011 reflected tightness in the global crude oil market that began in 2010 and marked the highest crude oil prices since 2008. Key factors affecting crude prices in 2011 included:

• Arab Spring. The Arab Spring and the civil war in Libya roiled oil markets during the first half of the year. Prices quickly escalated when protests in Libya intensified in late February. The spot price of Brent increased $15 per barrel from February 18 to March 2 as the market coped with the loss of 1.5 million barrels per day (bbl/d) of exports from Libya. With low spare production capacity, this sudden supply loss challenged the ability of the Organization of the Petroleum Exporting Countries (OPEC) producers to provide incremental supplies to an already tight market.
• Demand. Demand growth in emerging markets, notably China and the Middle East, drove crude oil prices higher in 2011 as well. During the first six months of 2011, the demand for petroleum products in countries not part of the Organization for Economic Cooperation and Development (non-OECD) grew by almost 4%, just as the market was coping with the loss of Libyan exports. Even with declining OECD country demand in 2011, overall global demand rose by 1.2% (1.1 million bbl/d).
• Transportation Bottlenecks. Brent's price strength in the first half of 2011 was not matched by WTI, which became dislocated from the global crude oil market due to transportation bottleneck issues in the U.S. Midwest (see chart below). Amid fast-rising crude oil production from the Bakken Shale formation and Canadian oil sands, prices for U.S. inland crude benchmark WTI weakened relative to those of broadly traded coastal or imported crude oil grades, such as Brent or Louisiana Light Sweet (LLS). Brent's premium to WTI reached a record level of almost $30 per barrel in September 2011. Between October and November the premium fell almost $20 per barrel, most likely as a result of signs that transportation constraints out of the U.S. Midwest, the main market for WTI, were easing. However, the spread ended the year close to $10 per barrel, still wide by historical standards.

Source: U.S. Energy Information Administration, based on Thomson Reuters.

---

While WTI experienced a wide trading range in 2011, as its isolated market depressed the crude's value, Brent and other waterborne crudes maintained a fairly stable trading range anchored around $110 per barrel from May through the end of the year. Factors mitigating upward crude oil price pressure in 2011 included:

• Debt Crisis. The European debt crisis loomed large over the global economy, and expectations for economic growth globally, especially in the OECD economies, were not realized over the course of the year, resulting in lower-than-expected growth in demand for petroleum products.
• Strategic Petroleum Release. In response to the loss of Libyan supplies, the International Energy Agency's member countries collectively released stocks from their strategic petroleum reserves during the summer months.
• Supply Gains. Output increases from Saudi Arabia (OPEC's largest producer) and the return of Libyan oil production helped dampen price increases during the second half of the year.

Could Crude Oil Prices Intensify a Pending SP 500 Sell Off?

Crude Oil Settles Lower after US Oil Data

Crude oil futures prices settled 1.3% lower Wednesday, hit by a steep fall drop in U.S. oil demand and a sharp rise in fuel stockpiles. Prices ended at the lowest level so far in 2012, but were supported above $100 a barrel by growing concerns about the reliability of near term crude oil supply from Iran and Nigeria.

A Nigerian union leader said Wednesday that workers at oil platforms are on "red alert" and ready to shut down facilities in a growing national strike that erupted in response to soaring fuel costs after the government abruptly halted a $7 billion fuel subsidies program. Nigeria pumped 2.2 million barrels a day in December, according to U.S. estimates, and supplied 9% of U.S. crude oil imports in the first 10 months of 2011.

Meantime, U.S. Treasury Secretary Timothy Geithner on Wednesday urged top Chinese officials to significantly reduce imports of Iranian crude, after a new U.S. sanctions policy focused on nations that continue trading with Iran. Countries can avoid those sanctions by showing a significant reduction in Iranian oil imports.....Read the entire Rigzone article.


Could Crude Oil Prices Intensify a Pending SP 500 Sell Off?

ONG: Crude Oil Daily Technical Outlook For Wednesday January 11th

Crude oil continues to be bounded in sideway trading from 103.74 and intraday bias remains neutral for the moment. After all, near term outlook will remain bullish as long as 98.30 minor support holds. We'd expect rise form 74.95 to resume sooner or later. Above 103.74 will target 114.83 key resistance next. Though, break of 98.30 will dampen this bullish view and turn bias back to the downside for 92.52 support instead.

In the bigger picture, recent development indicates that pull back from 114.83 was completed at 74.95 already and medium term rally from 33.2 is not finished yet. We'd tentatively treat rise from 74.95 as resuming of such rally. Sustained break of 114.83 will target 61.8% projection of 33.2 to 114.83 from 74.95 at 125.40. On the downside, though, break of 92.52 support will indicate that correction pattern from 114.83 is going to extend further with another falling leg to 74.95 and below before completion.

Nymex Crude Oil Continuous Contract 4 Hour, Daily, weekly and Monthly Charts

Could Crude Oil Prices Intensify a Pending SP 500 Sell Off?