Weekly Energy Futures Wrap Up

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Energy futures are lower once again today on pessimism concerning the European recession as well as a slowdown in China causing crude oil prices in early trading in New York to be down another $.85 in the June contract trading at $96.22 a barrel also in sympathy with the stock market the rest the commodity markets all lower this morning putting crude oil down nearly $2.00 dollars for the week right at 5 month low after selling off more than $8 dollars last week.

Unleaded gasoline futures are also at a five month low down 250 points at 2.985 in the June contract continuing its bearish momentum on the fact that OPEC came out and said supplies are very excessive at this point and abundant.

Heating oil futures for the June contract are down nearly 200 points also near five month low currently trading at 2.97 a gallon while natural gas futures which have been up four days a row are down slightly trading around 2.47 down around two points for the trading session in real quiet light volume so far this morning.

The U.S dollar is basically unchanged for the trading day not having much impact on energy prices this morning, however with an adequate supply in the market and with the rising dollar and slowing European countries I still think crude oil could break 90 dollars a barrel in the next coming weeks and I’m pessimistic on all of the commodities and as I’ve been stating in many blogs in the last several weeks because demand is slowing down tremendously at this point.

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Natural Gas Weekly Update

• Natural gas prices remained above $2.00 per million British thermal units (MMBtu) over the report week (Wednesday to Wednesday) at most trading locations across the country. The Henry Hub price closed within a 9 cent range, settling at $2.36 per MMBtu yesterday (up 5 cents for the week).
• The natural gas futures market generally trended higher over the week. At the New York Mercantile Exchange (NYMEX), the June 2012 natural gas contract gained 21.2 cents per MMBtu to close at $2.465 per MMBtu yesterday.

• Working natural gas in storage rose slightly last week to 2,606 billion cubic feet (Bcf) as of Friday, May 4, according to EIA’s Weekly Natural Gas Storage Report (WNGSR). An implied storage build of 30 Bcf for the week positioned storage volumes 799 Bcf above year-ago levels.
• The natural gas rotary rig count, as reported by Baker Hughes Incorporated on May 4, declined by 7 to 606 active units, 32 percent lower than the same week last year. Meanwhile, oil-directed rigs increased by 27 to 1,355 units, 45 percent above the same week last year.

Get more natural gas details at the EIA website

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Bearish Pennant Pattern Forms on the Crude Oil Daily Bar Chart

Crude oil closed up $0.15 a barrel at $96.96 today. Prices closed near mid range today and saw tepid short covering in a bear market. The bears still have the overall near term technical advantage. A bearish pennant pattern has formed on the daily bar chart.

Natural gas closed up 1.6 cents at $2.481 today. Prices closed near mid range today and hit another fresh six week high. The bulls have gained some fresh upside near term technical momentum this week. The bears do still have the overall near term technical advantage, however.

Gold futures closed up $1.90 an ounce at $1,596.10 today. Prices closed near mid range and tried to stabilize and consolidate today. Prices Wednesday hit a 17 week low. Serious near term chart damage has been inflicted this week. Gold bears have the solid near term technical advantage. A nine week old downtrend is in place on the daily bar chart.

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Transocean: First Quarter Results Show Company Potential

Transocean (RIG) announced its first quarter 2012 results on May 2, 2012. Here are some of the highlights from this report:

• First quarter revenues totaled $2.331 billion. This is a decrease from the $2.422 billion in revenues in the fourth quarter of 2011.
• First quarter 2012 net income attributable to controlling interest was $42 million. This is a significant improvement from the $6.119 billion loss that was taken during the fourth quarter of 2011. The reason for this huge disparity can be found by looking at the "net unfavorable items" category on the income statement. Transocean had $184 million of such items in the first quarter of 2012. The company had $6.176 billion of such items in the fourth quarter of 2011. If these net unfavorable items are backed out, we can see that Transocean still had a higher net income in the first quarter of 2012 compared to the fourth quarter of 2011: $226 million versus $57 million.
• Revenue efficiency was 90.4% in the first quarter of 2012 compared to 91.9% in the fourth quarter of 2011.
• Fleet utilization was 61% for the quarter.
• First quarter 2012 operating and maintenance expenses were $1.410 billion. This is an improvement from the fourth quarter of 2011 which saw operating and maintenance expenses of $1.565 billion excluding estimated loss contingencies associated with the Deepwater Horizonincident.
• Operating cash flows for the first quarter of 2012 totaled $540 million. This is a decrease from the $563 million that the company had in the fourth quarter of 2011.

Over the last few months, I have written several articles showing the strong fundamentals for the offshore drilling market. Transocean made a point of restating these trends during their earnings conference call. According to Terry Bonno, Transocean's SVP of Marketing, "Utilization and dayrates are continuing to improve and have reached levels not seen since the last cycle."

.........Read the entire article "Transocean: First Quarter Results Show Company Potential"

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Cnooc Deploys Oil Rig as Weapon to Assert China Sea Claims

China’s first deep water drilling rig began operations near an island chain in the South China Sea in a move to assert Beijing’s territorial claims as travel agencies suspended Philippines tours amid safety concerns.

Cnooc Ltd., China’s largest offshore oil producer, said its semi submersible CNOOC 981 began drilling yesterday 320 kilometers (199 miles) southeast of Hong Kong at a depth of 1,500 meters, the official Xinhua News Agency reported. The area is north of the Paracel islands claimed by China, Vietnam and Taiwan.

“Large deep water drilling rigs are our mobile national territory and strategic weapon for promoting the development of the country’s offshore oil industry,” said Wang Yilin, Cnooc’s chairman, according to Xinhua. The rig would help China secure energy resources in the waters, it cited him as saying.

Competition for energy reserves in the sea has increased tensions as countries shun joint development and improve their respective naval capabilities. Chinese vessels have confronted Vietnamese survey ships over the past year and have been locked in a monthlong standoff with Philippine boats over a disputed island in another area of the sea.....Read the entire article.

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The Problem With Greece

Can Greece leave the Euro and the rest of the world keeps moving along? Turmoil in Greece and a call by the leftist Syriza Alexis Tsipras to reverse what he calls ‘barbarous austerity” has put the future of the entire Eurozone in doubt. While it is unlikely that Mr. Tsipras will be able to form the necessary coalition to gain power, the uncertainty about Greece’s future plans could hurt the Euro.

Pressure brought on by voters in Greece to try to roll back plans to cut the budget and pay its bills could destroy the European Central Bank plan to avoid a total default. Now the question is whether a Greek exit would be catastrophic or is it destined to happen regardless.

The fear of a Greek exit has not been just about Greece but fear of contagion. If Greece exits the Eurozone, what will happen to other weak members of the zone. If Greece is allowed to just default and walk away after taking others cash that they lent to Greece in good faith, others will have a precedent for an exit strategy. The question of moral hazard now comes into play. If Greece can take the EU money and then walk away, why then would another EU country move to help another EU member?

Of course this raises the larger question of the problem....Read the entire article.

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Another "Risk Off" Day Bearish for Crude Oil

Crude oil closed down $0.62 a barrel at $97.32 today. Prices closed nearer the session high again today. Prices Monday hit a 4 1/2 month low of $95.34. The bears have the overall near term technical advantage with the recent price downdraft. It was another “risk off” trading day today and as the U.S. dollar index was higher, both being bearish for crude.

Natural gas closed up 9.4 cents at $2.43 today. Prices closed nearer the session high today and hit a fresh six week high. The bulls gained fresh upside near term technical momentum today. The bears do still have the overall near term technical advantage, however.

Gold futures closed down $35.20 an ounce at $1,604.00 today. Prices closed nearer the session low and hit a fresh four month low today as fresh, serious near term chart damage was inflicted. It was yet another “risk off” trading day today and the key “outside markets” were in a bearish posture for gold as the U.S. dollar index was firmer and crude oil prices were lower. Gold bears have the near term technical advantage and gained more downside momentum today. A two month old downtrend has been re established on the daily bar chart.

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EIA Publishes Monthly Biodiesel Production Data for 2010 and 2011

U.S. production of biodiesel was a record 109 million gallons in December 2011, according to new data released by the U.S. Energy Information Administration (EIA). Production came from 113 active biodiesel plants. Biodiesel production for all of 2011 was 967 million gallons, which was the highest level recorded since EIA began tracking this data. Biodiesel fuel is mainly used for transportation, similar to diesel fuel.



Monthly biodiesel production had both sharp increases and decreases in 2009 and 2010 due in part to the expiration and reinstatement of Federal tax credits and renewable fuels standards affecting biodiesel. After reaching 64 million gallons in November 2009, biodiesel production fell following the expiration of the blending tax credit of $1.00 per gallon at the end of 2009. With the December 2010 reinstatement of the blending tax credit effective through December 2011 and increased requirements for biomass based diesel under the renewable fuels standard, production rebounded from a low of 22 million one year before.

Annual biodiesel production was 516 million gallons in 2009. Production fell to 343 million gallons in 2010 but then rebounded to 967 million gallons in 2011.

Soybean oil was the largest biodiesel feedstock in 2011, at 4,136 million pounds consumed. The next three largest biodiesel feedstocks during 2011 were canola oil (847 million pounds), yellow grease and other recycled feedstocks (665 million pounds), and white grease (533 million pounds).


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Saudi Arabian Oil Minister Says Crude Oil Prices are too High

Crude oil fell for a fifth day as Saudi Arabian Oil Minister Ali al-Naimi said prices are too high and the euro weakened against the dollar after the weekend’s election results. Crude oil prices are “still a little bit high,” al-Naimi said in Tokyo today before board meetings of Saudi Arabian Oil Co., of which he is chairman.

The euro fell for a seventh day as Greek politicians struggled to form a new government and on the possibility of a policy conflict between Germany and France, which elected Socialist Francois Hollande president. “The Saudis are still coming out and saying prices are too high, and they probably will continue to ramp up production,” said Phil Streible, a Chicago based commodities broker at RJO Futures. “The euro is getting everything down.”

Crude for June delivery fell 89 cents, or 0.9 percent, to $97.05 a barrel at 9:18 a.m. on the New York Mercantile Exchange. The five day losing streak is the longest since Feb. 2. Prices have fallen 12 percent since Feb. 24, when they reached the 2012 high of $109.77.

Brent oil for June settlement dropped 98 cents, or 0.9 percent, to $112.18 a barrel on the London based ICE Futures Europe exchange.....Read the entire article.

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Short Covering Rally in Crude Oil Tempers Early Session Losses

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Crude oil [June contract] closed lower on Friday and below the 38% retracement level of the 2011-2012 rally crossing at 98.15. A short covering rally tempered early session losses and the high range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term. If June extends this month's decline, the 50% retracement level of the 2011-2012 rally crossing at 94.04 is the next downside target. Closes above the 20 day moving average crossing at 103.27 are needed to confirm that a low has been posted. First resistance is the 20 day moving average crossing at 103.27. Second resistance is last Tuesday's high crossing at 106.43. First support is today's low crossing at 95.34. Second support is the 50% retracement level of the 2011-2012 rally crossing at 94.04.

Natural gas closed higher on Monday as it extended last week's trading range. The high range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term. If June extends the rally off last week's low, the reaction high crossing at 2.607 is the next upside target. Closes below the 20 day moving average crossing at 2.157 would signal that a short term top has been posted. First resistance is last Tuesday's high crossing at 2.385. Second resistance is the reaction high crossing at 2.607. First support is the 20 day moving average crossing at 2.157. Second support is the reaction low crossing at 1.982.

Gold closed lower on Monday and the mid-range close sets the stage for a steady opening on Tuesday. Stochastics and the RSI are bearish signaling sideways to lower prices are possible near term. If June renews the decline off February's high, the 75% retracement level of the December-February rally crossing at 1595.00 is the next downside target. Closes above the reaction high crossing at 1699.60 are needed to confirm that a short term low has been posted. First resistance is the reaction high crossing at 1681.30. Second resistance is the reaction high crossing at 1699.60. First support is April's low crossing at 1613.00. Second support is the 75% retracement level of the December-February rally crossing at 1595.00.

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