Five States Accounted for About 56% of Total U.S. Crude Oil Production in 2011

Combined oil production (crude oil and lease condensate) from the top five U.S. oil-producing states increased during 2011 (see chart above). The biggest gains were in North Dakota and Texas, due in large part to increased horizontal drilling and hydraulic fracturing activity. Texas, Alaska, California, North Dakota, and Oklahoma accounted for about 56% of U.S. oil production last year, according to EIA's February Petroleum Supply Monthly report.

Source: U.S. Energy Information Administration, Petroleum Supply Monthly.
Note: Production data includes crude oil and lease condensate.

 Highlights from the top oil producing states in 2011 included:

• Texas. The Eagle Ford shale formation in south Texas contributed to gains in the state's oil production, which averaged 1,425 thousand barrels per day (bbl/d), the highest level since 1997.
• Alaska. Oil production fell for the ninth year in row, averaging 563 thousand bbl/d.
• California. Oil production averaged 535 thousand bbl/d, the lowest level in at least three decades.
• North Dakota. Preliminary data indicate increasing oil production from the Bakken formation pushed North Dakota ahead of California in December as the third biggest oil-producing state. North Dakota's oil production averaged 535 thousand bbl/d in December 2011 and 419 thousand bbl/d for the year.
• Oklahoma. Oil production averaged 204 thousand bbl/d during 2011, topping 200 thousand bbl/d for the first time since 1998.

Source: U.S. Energy Information Administration, Petroleum Supply Monthly.

Note: Production data includes crude oil and lease condensate. 

Check out our latest Video, Market Analysis and Forecast for the Dollar, Crude Oil, Gold, Silver, and the SP500

Crude Oil, Natural Gas and Gold market Commentary For Tuesday March 13th

Crude oil [April contract] posted an inside day with a higher close on Tuesday as it extends the trading range of the past two weeks. The high range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI remain neutral to bearish hinting that a short term top might be in or is near. Closes below last Wednesday's crossing at 104.35 are needed to confirm that a short term top has been posted. If April renews this winter's rally, the 2011 high crossing at 114.09 is the next upside target. First resistance is this month's high crossing at 110.55. Second resistance is the 2011 high crossing at 114.09. First support is last Wednesday's low crossing at 104.35. Second support is the reaction low crossing at 97.73.

Natural gas [April contract] posted a key reversal up due to short covering on Tuesday as it consolidated some of the decline off February's high. The high range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI are oversold and are turning neutral to bullish hinting that a short term low might be in or is near. Closes above the 20 day moving average crossing at 2.537 would confirm that a short term low has been posted. If April extends the multi year decline, monthly support crossing at 1.960 is the next downside target. First resistance is the 10 day moving average crossing at 2.376. Second resistance is the 20 day moving average crossing at 2.537. First support is today's low crossing at 2.204. Second support is monthly support crossing at 1.960.

Gold [April contract] closed sharply lower due to strength in the financial markets on Tuesday. The low range close sets the stage for a steady to lower opening on Wednesday. Stochastics and the RSI are oversold and are turning neutral to bullish hinting that a low is in or near. Closes above the 20 day moving average crossing at 1726.90 would temper the near term bearish outlook. If April renews the decline off February's high, the reaction low crossing at 1652.20 is the next downside target. First resistance is the 20 day moving average crossing at 1726.90. Second resistance is February's high crossing at 1792.70. First support is last Tuesday's low crossing at 1663.40. Second support is the reaction low crossing at 1652.20.

Check out our latest Video, Market Analysis and Forecast for the Dollar, Crude Oil, Gold, Silver, and the SP500

The Dead Cat (SP500) Did Bounce Just As We Expected!

Stocks are pushing deep into a resistance level with very light volume… not a bullish sign. This is why we took profits yesterday with our SSO trade once we reached our dead cat bounce target of 2.5%. With it being Friday volume should only get lighter as the say progresses. I am starting to look at buying SDS as risk is low in my opinion but I’m going to let the morning play out first and re analyze in the afternoon.

Pre-Dead Cat Bounce Warning:

The rising market has sent the volatility index tumbling lower and this just goes to show why you must manage position and use protective stops. I know many of you were angry that I said to take partial profits and that we got stopped out yesterday on the VXX trade for a net gain of 2.9% in three days. Maybe one day emotional traders will see that you must trade with the market and adjust your trade outlook while in the trade. The market does not stop and wait for you to see the light, rather it will just steam roll you and never look back.

So with that being said I am starting to really like the VXX again for another buy signal. With any luck it could keep dropping for most of the session and we could go long this afternoon.

Crude oil is moving nicely in our favor today up another 2% on our 2x leveraged ETF’s. I am keeping my stop at breakeven for now as but that may change by the end of the day if we break the $109 level which is unlikely. Where to put your stops for any trade is always a tough call. It varies on the time frame, overall market condition and the size of your position so don’t think it’s just as simple s using the previous pivot high or low. That being said, those are good places for them if you have the timing correct or if the market co-operates with you…

*One key thing to point out today, the dollar bounced off support which is what I warned about last night and again this morning in pre-market. The strong bounce in the dollar has not caused any selling in oil or stocks this morning. I think that is based on the strong jobs report this morning. More jobs means businesses should be getting stronger and the more gas/oil will be consumed. But if the dollar keeps on moving higher and breaks above this key resistance level in the next few trading sessions then it will likely cause selling in stocks. Oil may hold up because demand will still be there.

Let’s see how this week unfolds!

Chris Vermeulen – Get our free Trade Ideas at Technical Traders.Com

Phil Flynn: Excessive Risk Assumption!

In the battle over speculation, I truly believe that many do not understand what is going on. Perhaps it is the word “speculation” that is causing some of the confusion. When the word “speculator” is used it conjures up the images of Wall Street Fat Cats in a sushi filled room hatching evil, deceptive plans to corner a market and doom us all. The truth is that the only reason the economy exist is because we have people who are willing speculate because it carries considerable financial risk with the hopes of making a profit.

Farmers speculate that when they plant a crop that it will grow and they will have someone who will want to buy it from them. Airlines speculate everyday hoping that people will want to travel and they can charge enough for their plane tickets to cover food costs. Even the guy who delivers your pizza speculates that you will tip him enough to cover the cost of his gas. Some speculations carry little risk and some carry considerably more and the potential for profit and the size of profit are all tied back to the amount of risk the speculator assumes by his actions.

Now sometimes these speculative thoughts may not pan out especially if the guy who delivers the pizza gets a cheapskate and thus no tip. Or the farmer that either can’t grow the crop due to drought or perhaps he chose to grow what ended up being the wrong crop a particular year where demand was not what he tonight it might be. Or an airline that fails to get as many passengers as wanted because of stiff competition or surging fuel costs. Every one of these speculators is taking a risk because if this event happens or that event doesn't happen, they could go out of business. Read Phil's entire article.......

Get our latest "Profitable Options Strategies Report"

Peter Beutel, Energy Analyst and Editor at Daily Energy Hedger Dies at 56

Peter Beutel, an analyst and editor of the Daily Energy Hedger newsletter, who often appeared on CNBC, Bloomberg Television and Fox News, has died. He was 56.

Beutel died yesterday of a heart attack at his home in New Canaan, Connecticut, his mother, Gail Beutel, said. His father, Bill Beutel, was the anchorman for New York’s WABC-TV for more than 30 years and died in 2006.

Peter Beutel, founder and president of Cameronhanover.com, an energy advisory company, died in New Canaan, Connecticut. He was 56.

He was president of Cameron Hanover, an energy research and risk management company he founded in 1994. Based in New Canaan, it provides fundamental and technical analysis of crude oil, natural gas and other energy markets, and published the Daily Energy Hedger.

In his 2005 book, “Surviving Energy Prices,” Beutel recounts the history of oil trading since about 1850, when people relied on coal for heat and whale oil for light. Crude “was an alternative source of energy, like wind power and solar energy are today,” he wrote.

“In the last 20 years, rampant price fluctuations have forced everyone buying, selling or using oil to reconsider the way they do business,” Beutel wrote. “The world keeps changing, and there’s nothing new in that.”

Peter C. Beutel was born on July 22, 1955. His father, in addition to anchoring news at WABC, was the first host of “AM America,” which eventually became ABC’s nationally televised “Good Morning America” program.

From E.F. Hutton......
The younger Beutel graduated from Dartmouth College in Hanover, New Hampshire, in 1977, 24 years after his father had done so.

Peter Beutel began working on Wall Street at E.F. Hutton in 1979, according to Cameron Hanover’s website. His career took him to Gill & Duffus, Donaldson, Lufkin & Jenrette and Merrill Lynch & Co., where he worked prior to starting Cameron Hanover.

“Peter was a great friend and business partner,” said Vince Lanci, managing partner and a partner with Beutel at FMX Connect LLC, a Stamford, Connecticut based commodity information provider. “He was an oil analyst for more than 30 years, going back to the days of E.F. Hutton. He will be sorely missed.”

Posted courtesy of Bloomberg News

ONG: Crude Oil Weekly Technical Outlook For Saturday March 10th

Crude oil dipped to 104.35 last week but drew support form 38.2% retracement of 95.44 to 110.55 at 104.78 and recovered. However, the recovery was weak so far and looks corrective. The development suggest that another decline would be seen as correction from 110.55 extends. Below 104.35 will target 61.8% retracement at 101.21. On the upside, break of 110.55 will confirm rally resumption for 114.83 key resistance. But before that, more consolidative trading would be seen first.

In the bigger picture, the medium term up trend from 33.2 shouldn't be completed yet. Rise from 74.95 is indeed tentatively treated as resumption 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 95.44 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.

In the long term picture, crude oil is in a long term consolidation pattern from 147.27, with first wave completed at 33.2. The corrective structure of the rise from 33.2 indicates that it's second wave of the consolidation pattern. While it could make another high above 114.83, we'd anticipate strong resistance ahead of 147.24 to bring reversal for the third leg of the consolidation pattern.

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


Check out today's "50 Top Trending Stocks"

Crude Oil Bulls Struggle to Show They Have The Advantage

Crude oil closed higher due to short covering on Thursday as it consolidated some of Tuesday's decline. The high range close sets the stage for a steady to higher opening on Friday.

Stochastics and the RSI remain bearish signaling that a short term top might be in or is near. Closes below Wednesday's crossing at 104.35 are needed to confirm that a short term top has been posted. If April renews this winter's rally, the 2011 high crossing at 114.09 is the next upside target.

First resistance is last Thursday's high crossing at 110.55. Second resistance is the 2011 high crossing at 114.09. First support is Wednesday's low crossing at 104.35. Second support is the reaction low crossing at 97.73.

Check out our latest Video, Market Analysis and Forecast for the Dollar, Crude Oil, Gold, Silver, and the SP500

U.S. Petroleum Product Exports Exceeded Imports in 2011 For First Time in Over Six Decades

Source: U.S. Energy Information Administration, Petroleum Supply Monthly.
Notes: Net exports equal gross exports minus gross imports. Negative net export values indicate net imports.

The United States in 2011 exported more petroleum products, on an annual basis, than it imported for the first time since 1949, but American refiners still imported large, although declining, amounts of crude oil, according to full-year trade data from EIA's Petroleum Supply Monthly February report. The increase in foreign purchases of distillate fuel contributed the most to the United States becoming a net exporter of petroleum products.

U.S. petroleum product net exports (exports minus imports) averaged 0.44 million barrels per day (bbl/d) in 2011, with imports at a nine-year low of close to 2.4 million bbl/d and exports at a record high of nearly 2.9 million bbl/d. The gap between exports and imports widened the most during the second half of the year from August through December (see charts below), with total monthly exports topping 3 million bbl/d for the first time.

Source: U.S. Energy Information Administration, Petroleum Supply Monthly.

Strong global demand helped propel distillate exports, as distillate fuel, which includes diesel, had a higher profit margin for U.S. refiners than gasoline. Refiners also had access to increased supplies of crude oil imports from Canada, which in 2011 topped 2 million bbl/d for the first time, and from North Dakota's Bakken formation to process into petroleum products.

The United States remained a net importer of crude oil, some of which was refined into petroleum products that were then exported. Petroleum products were ranked second in value of all U.S. exports during 2011 at $111.1 billion, up 60% from 2010, according to U.S. Department of Commerce trade data. Vehicles were the number one U.S. export last year at $132.5 billion. Crude oil was the biggest U.S. import, valued at $331.6 billion, up 32% from 2010. Rising crude oil prices, rather than higher crude oil import volumes, were the key driver of the increased value of crude oil imports.

Check out our latest Video, Market Analysis and Forecast for the Dollar, Crude Oil, Gold, Silver, and the SP500

Disappointing Day For Crude Oil Bulls

It was a disappointing day for the bulls in crude oil, as this market pulled back to an area where it should begin to find support around the $105 level We continue to favor the long side of this market and expect it will improve into early April.

We are looking for crude oil to make its highs probably somewhere in the April May period. With a Trade Triangle score of +55, we believe this market is regrouping to move higher later in the month. We expect to see further gains in crude oil. All traders should be long this market with appropriate money management stops.

Crude oil [April contract] closed down $1.88 a barrel at $104.84 today. Prices closed nearer the session low today and hit a fresh two week low. The market was pressured by a stronger U.S. dollar index today. Crude oil bulls still have the overall near term technical advantage but did fade today.

Here is Today's 50 Top Trending Stocks

The U.S. Dollar and Crude Oil Hold Clues About The Future

The past few months have been a difficult environment for anyone that was bearish. The next few months may prove to be difficult for everyone regardless of directional bias.

We live in a world where headlines can move the market in split seconds as high-frequency trading robots cause flash rally’s and flash crashes regularly.

As an example, the price action in the Market Vectors Short Muni Index (SMB) on February 28^th demonstrates the impact that these high frequency traders have on illiquid underlying assets.

We certainly hope there were not any absent minded retail investors that got caught using market orders during the flash rally only to recognize losses as great as 5% or more in a matter of minutes.

The following chart illustrates a flash rally and the monster 40% plus rally witnessed in less than 1 minute. Can someone say fat finger mistake?

Market Vectors Short Muni Index 1-Minute Chart

In addition to high frequency trading, we have to constantly monitor the headlines coming out of Europe as one event or official statement has the potential to cause the Euro to rally or selloff almost instantly whether the information is fact or fiction.

We have traded small for the most part during the beginning of 2012 as market conditions have been volatile even if the volatility index (VIX) has not necessarily supported that view.

One after another, perma-bears have capitulated to the bullish camp and now we have pundits calling for the Dow Jones Industrial Average to move over 15,000 by the end of the year.

We both use strategies which in many cases would be considered contrarian by nature. Admittedly we will not get every move in the market correct, but what we will do is layout key areas that price action should migrate to in the form of key price levels across short, intermediate, and long term time frames.

Our objective is to provide readers and our members with actionable information which can be viewed objectively by both bulls and bears alike. With that said, the following viewpoint we have of the marketplace today runs contrary to the collective group of market pundits.

While most market pundits expect higher prices and stronger economic data, there is reason to believe that recent developments could be indicating that volatility may lurk ahead. Volatility could rise up and push equity valuations lower in the near term.

The daily chart of the Ipath S&P 500 VIX Short-Term Futures ETF (VXX) shown below illustrates that the VXX has seen strong volume in the past few weeks. Additionally the VXX appears to be trying to form a bottom.

With volatility at these levels, put protection is cheap and it would appear based on volume that the smart money is getting long volatility. Long VXX trades are designed to either act as a portfolio hedge or as a potential profit mechanism should a correction play out.

Ipath S&P 500 VIX Short-Term Futures (VXX) Daily Chart

By now most readers are aware of the rally that has been taking place in oil futures for the past few weeks. Nancy Pelosi came out with a statement blaming those evil speculators again while Republican Presidential hopefuls used higher oil prices as another key political topic against the current administration.

Just when the noise was starting to rise to a roar, the marketplace was quieted by a rally in the U.S. Dollar on February 29^th. The daily chart of the Dollar Index futures is shown below.

Dollar Index Futures Daily Chart

Do readers find it rather odd that just about the time when oil was on the lips of every media personality in the United States that the Federal Reserve issues a reverse-repo to pull in liquidity? Do you find it at all coincidental or could it be that Mr. Bernanke was told to slow down the rally in oil prices?

After the reverse-repo was performed, the Dollar soared higher and was showing continuation to the upside on Friday afternoon during intraday trade. The Dollar is potentially forming a bottom presently and the fact that the Federal Reserve is aiding in that formation presents additional risk for downside in the S&P 500 Index and precious metals in the near term.

For the past several weeks the U.S. Dollar Index has pulled back and the S&P 500 definitely took notice. However, the Dollar is on the verge of carving out a weekly swing low which could have legs to much higher prices.

While many pundits routinely mock the Dollar and trash it, in the event of a major currency or credit event in Europe the Dollar will be one of the key safe havens that large sums of wealth will migrate too.

If the Dollar Index Futures can push through the downtrend line illustrated on the chart above with strong supporting volume a much larger move higher will likely play out. Should that scenario play out, the S&P 500 Index will likely begin to rollover.

It should be noted that the S&P 500 has struggled on multiple occasions to break above the key 2011 highs. The S&P 500 Index daily chart below demonstrates the resistance directly above current price action.

S&P 500 Index Daily Chart

We have been bearish on the S&P 500 since price was testing the 1,330 price level. After the subsequent breakout we targeted the key 2011 highs as a last stand for the bears. If the Dollar finds a bottom and rallies sharply higher from current levels a correction in the S&P 500 will likely play out.

The other possibility would be a breakout over current resistance levels which would likely see the S&P 500 move to the 1,400 level if not higher in a matter of a few weeks. We are not leaning in either direction in terms of price action currently, but we are expecting the VIX to move higher in coming weeks and months ahead.

In our most recent collaborative missive, we discussed the fundamental case for gold prices going higher over the long term. Cleary the price action this week (specifically the price action on Wednesday February 29^th) has been bearish and we expect to see prices chop around with a potentially bearish view for the next few months.

Gold Futures Daily Chart

While gold has pulled back sharply, the likely move lower in coming weeks and months ahead will offer a strong buying opportunity for investors that are patient. If the Dollar breaks out to the upside which we anticipate, gold should move down into a significant low.

Should this scenario play out an entry point near the low will likely offer strong upside potential. In fact, it might be the last deep low before a prolonged period of choppy price action until the Dollar tops.

We firmly believe that as long as central banks continue to print money with wreckless abandon, the fundamental case for gold remains quite strong in the longer term.

We have received a lot of emails recently asking about our opinions on the future price action in oil. Even though the Dollar may breakout to the upside, oil has a risk premium built into the price already for potential geopolitical conflict. However, military action in the Middle East could easily push prices higher.

Should oil push higher and test the 2011 highs and breakout to the upside, the likely results will be a weakening in the domestic economy as gasoline and diesel prices would surge higher. A surge in oil prices has a direct implication to the domestic U.S. economy as the cost for nearly everything will rise. 

The daily chart of oil futures is shown below.

Oil Futures Daily Chart

Conclusion for what to expect next:

Ultimately we believe the two most critical assets to monitor at this time are the U.S. Dollar and oil futures. The U.S. domestic economy cannot handle significantly higher oil prices from the current levels without seeing business growth slow. Furthermore, if the Dollar rallies it could put pressure on the equity markets as well.

While the equity markets and the economy are not the same thing, it is important to note that higher oil prices at a certain point will become equity negative.

The VIX is sending a warning that market participants are too complacent and the Dollar is potentially forming a rounded out bottom. These two conditions paired with geopolitical risk in the Middle East represent additional risks to economic growth.

Furthermore, market participants cannot become complacent regarding the potential risk that Europe still poses. With the various risks listed above in mind, we are keeping position sizes small and are attempting to remain Delta neutral in our portfolios. Risk is beginning to elevate to extremes.

Get these reports delivered to your inbox every week with our FREE Weekly Newsletter