NOAA Predicts a Near Normal 2012 Atlantic Hurricane Season

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On May 24, 2012, the National Oceanic and Atmospheric Administration's Climate Prediction Center said that, for the six month hurricane season beginning June 1, there is a 70% chance of 9 to 15 named storms in the Atlantic Basin, of which 4 to 8 may strengthen to hurricanes. Of those, 1 to 3 may become major hurricanes (Category 3, 4, or 5). During the hurricane season from 1981 through 2010, the Atlantic basin averaged 12 named storms and 6 hurricanes each year, 3 of which were major hurricanes.

As of June 1, 2012, there have been two named Atlantic Basin storms (Tropical Storms Alberto and Beryl).



Tropical storms and hurricanes can temporarily disrupt the U.S. oil and natural gas supply chain (producing fields, gathering, processing, refining, and transportation), especially in the Gulf Coast region. The U.S. Energy Information Administration's Federal Offshore Gulf of Mexico reporting region (GOM Fed) is a key component of U.S. crude oil and natural gas production.

The GOM Fed region provided nearly one quarter of total U.S. crude oil production in 2011, the highest share among Federal offshore regions and second only to Texas among individual states. Driven by increasing volumes associated with deepwater and ultra-deepwater development activity, the GOM Fed region helped to reverse a decades-long decline in U.S. crude oil production in 2009. GOM Fed region production declined in 2010 and 2011, largely the result of suspended drilling activity following the Macondo oil spill. Exploration and development operations have since resumed, however.

The potential impact of hurricanes on U.S. natural gas supply is comparatively muted, as the GOM Fed region accounts for a relatively modest portion of total U.S. natural gas production. The GOM Fed region supplied about 8% of total U.S. marketed natural gas production in 2011, down significantly from a decade ago, when the region had an approximate one quarter share. The GOM Fed region's relative contribution has diminished as a result of both gradually declining offshore production and significant increases in Lower 48 output, due primarily to expanding shale gas developments in several areas of the country.

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Monday Mathem Chart and Live Video Analysis

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This week should be just exciting with the markets reaching extreme levels for bonds, gold, SP500, and crude oil. This morning’s video covers it in detail.

Pre Market Analysis Points....

* US dollar index in consolidation and also forming a mini head and shoulders pattern which if the neckline is broken points to lower prices for the dollar that may last 1-2 sessions.

* Gold and silver are both trading at resistance levels and are headline driven at this point. Anything could happen going forward so I remain on the side for now.

* Crude oil continues to show weakness but is now trading within a major support level. I am keeping my eye on the intraday charts for a reversal pattern to play a bounce/rally this week.

* Bonds continue to rise with record low yields… This shows there is real panic fear in the market and lower prices may continue for another week or two.

* The volatility index while elevated is still overall trading low. This means more downside is possible investors and baby boomers start to roll more of their money out of stocks and into bonds.

* SP500 sold down another 1% in futures trading after the closing bell which was very bearish. This morning we have seen the dollar index pullback and that has allowed the SP500 to recover the 1% post market drop on Friday.....Read the entire article and watch todays video.



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Crude Oil Bulls Get Some Help From 87% Retracement Level

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Crude oil closed higher due to short covering on Monday as it bounced off the 87% retracement level of the 2011-2012 rally crossing at 81.36. The high range close sets the stage for a steady to higher opening when Tuesday's night session begins. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If July extends this month's decline, last October's low crossing at 77.05 is the next downside target. Closes above the 20 day moving average crossing at 92.14 are needed to confirm that a low has been posted. First resistance is the 10 day moving average crossing at 88.86. Second resistance is the 20 day moving average crossing at 92.14. First support is today's low crossing at 81.21. Second support is last October's low crossing at 77.05.

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Natural gas closed higher due to short covering on Monday as it consolidated some of last week's decline. The high range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If July extends last week's decline, the reaction low crossing at 2.166 is the next downside target. Closes above the 20 day moving average crossing at 2.576 would confirm that a short term low has been posted First resistance is the 20 day moving average crossing at 2.576. Second resistance is the reaction high crossing at 2.838. First support is last Friday's low crossing at 2.313. Second support is the reaction low crossing at 2.166.

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Gold closed lower on Monday as it consolidates some of last Friday's rally. The low range close sets the stage for a steady to lower opening when Tuesday's night session begins trading. Stochastics and the RSI remain bullish signaling sideways to higher prices are possible near term. If August extends last Friday's rally, April's high crossing at 1674.30 is the next upside target. If August renews the decline off February's high, the 75% retracement level of the 2010-2011 rally crossing at 1461.30 is the next downside target. First resistance is last Friday's high crossing at 1632.00. Second resistance is April's high crossing at 1674.30. First support is the reaction low crossing at 1529.30. Second support is the 75% retracement level of the 2010-2011 rally crossing at 1461.30.

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MLP's....The Retail Investor Can Level The Playing Field

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One my favorite oil and commodities trader is Dan Dicker of MercBloc. Today he is bringing it to our attention how the retail investor can level the playing field by taking advantage of the pull back in energy right now. We have always loved the MLP's whether the market is up or down. We just don't see a downside either way.



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Chevron Phillips Chemical Signs Letter to Study Iraq Plant

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Iraq and Chevron Phillips Chemical Co., a joint venture of Chevron Corp. (CVX) and ConocoPhillips (COP), signed a letter of intent to evaluate the feasibility of developing a petrochemical plant in the country, officials said.

The company would examine building a new facility and upgrading an existing Iraq owned petrochemicals factory in southern Basra province, Hanaa al-Husseini, a spokeswoman for the Industry and Minerals Ministry, said today in Baghdad.

Melanie Samuelson, a spokeswoman for Chevron Philips, said in an e-mailed statement that the company, with headquarters in The Woodlands, Texas, wants to assess “the feasibility of developing an integrated petrochemical complex.” Both Chevron Phillips and the ministry declined to give additional details, including cost estimates or dates for the project.

Read the entire Bloomberg article.


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Crude Oil Bulls Take Brutal Beating on Jobs Report....Next stop $81.36!

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Crude oil closed lower on Friday following today's bearish jobs data, which suggest that we will likely see lower demand this summer. The low range close sets the stage for a steady to lower opening when Sundays evening session begins. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If July extends this month's decline, the 87% retracement level of the 2011-2012 rally crossing at 81.36 is the next downside target. Closes above the 20 day moving average crossing at 92.88 are needed to confirm that a low has been posted. First resistance is the 10 day moving average crossing at 89.64. Second resistance is the 20 day moving average crossing at 92.88. First support is today's low crossing at 82.29. Second support is the 87% retracement level of the 2011-2012 rally crossing at 81.36.

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Natural gas closed lower on Friday extending this week's decline. The low range close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term. If July extends this week's decline, the reaction low crossing at 2.166 is the next downside target. Closes above the 10 day moving average crossing at 2.606 would confirm that a short term low has been posted First resistance is the 10 day moving average crossing at 2.606. Second resistance is the reaction high crossing at 2.838. First support is today's low crossing at 2.313. Second support is the reaction low crossing at 2.166.

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Gold closed sharply higher on Friday following this morning's bearish jobs report. The mid range close sets the stage for a steady opening when Friday's night session begins trading. Stochastics and the RSI are bullish signaling sideways to higher prices are possible near term. Today's close above the reaction high crossing at 1601.40 confirms that a short term low has been posted. If August extends today's rally, April's high crossing at 1674.30 is the next upside target. If August renews the decline off February's high, the 75% retracement level of the 2010-2011 rally crossing at 1461.30 is the next downside target. First resistance is today's high crossing at 1632.00. Second resistance is April's high crossing at 1674.30. First support is the reaction low crossing at 1529.30. Second support is the 75% retracement level of the 2010-2011 rally crossing at 1461.30.

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New Video: Detailed Commodities Analysis From Chris Vermeulen

Chris V. just completed a detailed video analysis of the U.S. dollar, gold, gold miners, silver, bonds, crude oil, natural gas, and the SP500 which is very timely and will help you navigate this market today and next week.

Just Click Here to watch todays Video!


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Crude Oil Falls to Eight Month Low on Unemployment Rates

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Crude fell to the lowest level in almost eight months as worsening employment rates in the U.S. and the euro area signaled fuel demand may tumble. Oil dropped as much as 4.6 percent after the Labor Department said American employers added the smallest number of workers in a year in May. The jobless rate in the 17 countries that use the euro reached the highest level on record, the European Union’s statistics office in Luxembourg reported.

“You need a word stronger than terrible for the jobs report,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania. “Everything is driven by the lousy economic data.” Crude futures for July delivery declined $2.33, or 2.7 percent, to $84.20 a barrel at 9:39 a.m. on the New York Mercantile Exchange after falling to $82.56, the lowest intraday level since Oct. 7. Prices are down 23 percent from this year’s settlement high of $109.77 on Feb. 24.

Brent for July settlement tumbled $2.15, or 2.1 percent, to $99.72 a barrel on the ICE Futures Europe exchange in London, falling below $100 for the first time since October.

U.S. payrolls climbed by 69,000, less than the most pessimistic estimate in a Bloomberg survey in which responses ranged from increases of 75,000 to 195,000. The jobless rate rose to 8.2 percent from 8.1 percent. It was forecast to hold at 8.1 percent.

Unemployment has exceeded 8 percent since February 2009, the longest such stretch since monthly records began in 1948.....Read the entire Bloomberg article.


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King Dollar Dominates Crude Oil and Gold....Again!

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Crude oil closed lower on Thursday as it extends the decline off March's high. The low range close sets the stage for a steady to lower opening when Friday's night session begins. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If July extends this month's decline, the 75% retracement level of the 2011-2012 rally crossing at 85.69 is the next downside target. Closes above the 20 day moving average crossing at 93.86 are needed to confirm that a low has been posted. First resistance is the 10 day moving average crossing at 90.60. Second resistance is the 20 day moving average crossing at 93.86. First support is today's low crossing at 85.86. Second support is the 75% retracement level of the 2011-2012 rally crossing at 85.69.

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Natural gas closed slightly higher due to short covering on Thursday as it consolidated some of this week's decline. The mid range close sets the stage for a steady opening on Friday. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term. If July extends this week's decline, the reaction low crossing at 2.338 is the next downside target. If July renews the rally off April's low, February's high crossing at 3.104 is the next upside target. First resistance is the reaction high crossing at 2.838. Second resistance is February's high crossing at 3.104. First support is today's low crossing at 2.377. Second support is the reaction low crossing at 2.338.

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Gold closed lower on Thursday as it extended the trading range of the past two weeks. The mid range close sets the stage for a steady opening when Friday's night session begins trading. Stochastics and the RSI are bullish signaling sideways to higher prices are possible near term. Closes above the reaction high crossing at 1601.40 are needed to confirm that a short term low has been posted. If August renews the decline off February's high, the 75% retracement level of the 2010-2011 rally crossing at 1461.30 is the next downside target. First resistance is the 20 day moving average crossing at 1583.90. Second resistance is the reaction high crossing at 1601.40. First support is the reaction low crossing at 1529.30. Second support is the 75% retracement level of the 2010-2011 rally crossing at 1461.30.

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OPEC Spare Capacity in the First Quarter of 2012 at Lowest Level Since 2008

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The U.S. Energy Information Administration (EIA) estimates that global spare crude oil production capacity averaged about 2.4 million barrels per day (bbl/d) during the first quarter of 2012, down about 1.3 million bbl/d from the same period in 2011 (see chart below). The world's spare crude oil production capacity is held by member countries of the Organization of the Petroleum Exporting Countries (OPEC). Spare capacity can serve as a buffer against oil market disruptions, and it gives OPEC additional political and economic influence in world markets. There is little or no spare capacity outside of the OPEC member countries.



Spare crude oil production capacity is now less than 3% of total world crude oil consumption—the lowest proportion since the fourth quarter of 2008—based on EIA estimates.

Spare crude oil production capacity is an important indicator of producers' ability to respond to potential disruptions; consequently, low spare oil production capacity tends to be associated with high oil prices and high oil price volatility. Similarly, rising spare capacity tends to be associated with falling oil prices and reduced volatility. However, spare capacity must also be considered in the context of a number of other market factors that can drive crude oil prices, such as global supply, demand, and inventory levels.

EIA defines spare crude oil production capacity as potential oil production that could be brought online within 30 days and sustained for at least 90 days, consistent with sound business practices. This does not include oil production increases that could not be sustained without degrading the future production capacity of a field.


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