ONG: Crude Oil Prices Recover as Hurricane Sandy Approaches Northeast U.S.

Commodity prices recovered after days of losses. Crude oil prices gained modestly after news reported that Hurricane Sandy headed for the US after impacting Cuba and UK’s GDP turned out better than expected. Meanwhile, sentiment was also lifted as US’ initial jobless claim fell more than consensus, signaling improvement in the employment market. The front month contract for WTI crude oil added +0.37% while the equivalent Brent crude contract climbed +0.59%. Gold also rebounded despite slippage of the euro with the benchmark Comex contract gaining +0.67%.

The US East Coast is threatened by Hurricane Sandy which already killed 21 people across the Caribbean. Meteorologist said that the hurricane would probably grow into a "Frankenstorm" and give the Northeast US the worst hit in 100 years. The market worried that the storm might strengthen further and hurt supply of the gasoline and distillate market. Yet, this might not be able to support for too long as Wednesday’s report showed that oil inventories remained abundant.

In the UK, GDP surprisingly rose +1.0% q/q in 3Q12, following a -0.4% contraction a quarter ago. This was higher than the market forecast of a modest gain of +0.6% and marked the strongest gain since the financial crisis in 2007. In the Eurozone, ECB reported that lending to the private sector fell -0.8% from the same period a year ago. This was the 5th consecutive decline and the steepest since October 2009. As the economy is expected to remain weak for the rest of the year, lending growth is expected to contract further.

In the US, initial jobless claims fell -23K to 369K in the week ended October 20. The 4 week average, however, climbed +2K to 368K as the data in the previous week was revised by +4K to 392K. Continuous claims slipped -2K in the week ended October 13. Durable goods orders soared +9.9% in September, following a -13.2% contraction a month ago. Excluding transportation, the reading gained +2% in September after slipping -1.6% in the prior month. The US GDP probably gained +1.8% in 3Q12, up from +1.3% gain in the second quarter. Meanwhile, the University of Michigan confidence data might be revised down to 83 in October from the flash reading of 83.1.

Posted courtesy of Oil N'Gold.com

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Seadrill SDRL Reaches 64.23% Ownership in Asia Offshore Drilling

After close of trading on Oslo Børs on 25 October 2012 Seadrill Limited ("Seadrill") has acquired 12,190,858 shares of Asia Offshore Drilling Limited (the "Company", OSE: AOD). The shares were acquired at a price of US$5.0 per share (equals NOK28.71 based on the USD/NOK exchange rate set by the Norwegian Central Bank on 25 October).

Following this acquisition, Seadrill will be the owner of 25,690,958 shares in the Company, corresponding to 64.23% of the total number of outstanding shares in the Company. As a consequence, Seadrill will proceed with the launch of a mandatory cash offer for the remaining shares in the Company. Such mandatory offer will be launched as soon as practicably possible, within the time limits set out in chapter 6 of the Norwegian Securities Trading Act.

RS Platou Markets AS act as financial advisor to Seadrill in connection with the offer.


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ConocoPhillips Reports Third Quarter Earnings

ConocoPhillips (COP) today reported third quarter 2012 earnings of $1.8 billion, or $1.46 per share, compared with third quarter 2011 earnings of $2.6 billion, or $1.91 per share.

Excluding special items of $26 million, third-quarter 2012 adjusted earnings were $1.8 billion, or $1.44 per share, compared with third quarter 2011 adjusted earnings of $1.9 billion, or $1.40 per share. Special items for the current quarter were primarily related to net gains on asset sales offset by the impact of tax law changes in the United Kingdom and pension settlement expense.

Highlights

* Quarterly production of 1.525 million BOE per day.
* Continued ramp up in Eagle Ford and Bakken.
* Ongoing growth from Canadian oil sands and successful startup of Christina Lake Phase D.
* Major projects and drilling programs on schedule to deliver volume and margin growth.
* Completed turnarounds at major worldwide facilities, as planned.
* Ramping up exploration activity in conventional and unconventional opportunities globally.
* Completed sale of NMNG and dilution of interest in APLNG.

“We performed well in our first full quarter as an independent E&P company,” said Ryan Lance, chairman and chief executive officer. “Our production was on target, our growth projects and drilling programs are on track and our portfolio optimization plans continue to progress. Quarterly production, excluding the impact of dispositions, grew by 40 thousand BOE per day compared to the third quarter of 2011.”

“For the first nine months of 2012, we have generated $2.1 billion in proceeds from asset dispositions and remain on track to complete our $8-$10 billion disposition program by the end of 2013,” Lance added. “We are focused on delivering average annual production growth and margin growth of 3 to 5 percent, improving our financial returns, and offering a sector leading dividend.”

Read the entire earnings report

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EIA: Natural Gas Processing Plant Data Now Available

In the wake of Hurricane Katrina in 2005, which severely disrupted natural gas infrastructure in the Gulf Coast region, EIA established a triennial survey of natural gas processing plants (EIA-757) to be used as a baseline for assessing the effect of extreme weather on natural gas processing infrastructure. This past summer, EIA activated the baseline survey (EIA-757, Schedule A), the results of which are published in EIA's Natural Gas Annual Respondent Query System.

The EIA-757 survey has a baseline portion, Schedule A, to track the country's population of natural gas plants, and an emergency activation portion, Schedule B, to provide the operational status of processing plants in an area affected by a supply disruption, usually a natural disaster such as a hurricane. In August, EIA activated Schedule B to track shut in capacity caused by Hurricane Isaac. EIA used the information collected on EIA-757B to provide daily updates to the Department of Energy's Situation Report and to write a brief retrospective for Today in Energy.

 

Data from EIA-757 Schedule A show 517 active natural gas processing plants in the Lower 48 states, with a total processing capacity of 65.5 billion cubic feet per day. Not all processing plants run at full capacity all the time. On average, these plants processed about 44.7 billion cubic feet per day, operating at about 68% of capacity. Plants operate at less than capacity for many reasons: transportation constraints, varying input supplied from wells, and regional economics.

Processing plants are midstream facilities that separate natural gas liquids (NGL) from natural gas. Gas processing plants often perform several other functions, as well: dehydration, contaminant removal, and sometimes fractionation (separating an NGL stream into its component products). This survey is not a complete picture of processing capabilities, nor does it represent all processing plants that touch natural gas before it becomes pipeline-quality gas. At the well site, some upstream field processing may be done to remove condensate before gas is sent to a midstream processing plant for NGL extraction. In addition, gas producers may use dehydration units (to remove water) and amine treaters (to remove hydrogen sulfide and carbon dioxide).

Downstream from natural gas processing plants, the combined NGL stream is often broken into separate NGL products (ethane, propane, butane, iso-butane, pentane) by a fractionator. Sometimes straddle plants located on large pipelines will extract small quantities of NGL that remain in the stream even after processing. Similarly, newer, more efficient cryogenic plants may also sit downstream of other processing plants to strip out lighter NGLs that are left in the gas stream for technological or economic reasons. Most storage facilities also have some processing capabilities to dehydrate gas that is withdrawn from storage. When pipeline-quality natural gas is injected into storage, it mingles with other hydrocarbons or water, which must be removed before the gas can be reintroduced into the pipeline grid.

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National Oilwell Varco NOV Announces Third Quarter 2012 Results

National Oilwell Varco (NOV) today reported that for the third quarter ended September 30, 2012 it earned net income of $612 million, or $1.43 per fully diluted share, compared to second quarter ended June 30, 2012 net income of $605 million, or $1.42 per fully diluted share. Earnings per share increased 14 percent compared to the third quarter 2011 earnings of $1.25 per fully diluted share.

Transaction charges for the third quarter of 2012 were $57 million pre tax. Net income for the third quarter of 2012 excluding transaction charges was $650 million, or $1.52 per fully diluted share. This compares to second quarter of 2012 net income of $626 million, or $1.46 per fully diluted share, and third quarter 2011 net income of $536 million or $1.26 per fully diluted share, excluding transaction charges from all periods.

The Company’s revenues for the third quarter of 2012 were $5.3 billion, an increase of 12 percent from the second quarter of 2012 and an increase of 42 percent from the third quarter of 2011. Operating profit for the third quarter of 2012 was $946 million or 17.8 percent of sales, excluding transaction charges. Sequentially, third quarter operating profit increased four percent, resulting in operating profit flow through (change in operating profit divided by the change in revenue) of seven percent, excluding transaction charges. Year over year third quarter operating profit increased 22 percent, resulting in operating profit flow through of 11 percent, excluding transaction charges.

During the third quarter of 2012 the Company’s Rig Technology segment booked $2.29 billion in new orders. Backlog for capital equipment orders for the Company’s Rig Technology segment at September 30, 2012 was $11.66 billion, up three percent from the end of the second quarter of 2012.

Read the entire report

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U.S. shale energy production could support 3.5 million jobs by 2035

API President and CEO Jack Gerard said today that the latest report by IHS Global Insight shows development of America’s unconventional oil and natural gas resources could create nearly 2 million new jobs over the next two decades, reawaken American manufacturing, and provide massive revenues to the government.

"The study highlights the extraordinary opportunities we have right here at home to develop our unconventional oil and gas resources and return our economy to a pro-growth engine,” Gerard said. “Polls show Americans’ top priority is job creation and the oil and natural gas industry will be a driver for those new jobs, with nearly three quarters of a million new jobs added over just the next three years.”

The report, America’s New Energy Future: The Unconventional Oil and Gas Revolution and the U.S. Economy, finds that unconventional oil and natural gas production could produce significant growth in capital expenditures and employment, including:

• More than $5.1 trillion in cumulative capital expenditures by 2035.

• Adding 1.2 million new jobs by 2020, and supporting a total of 3.5 million jobs by 2035.

• Almost $62 billion in additional federal, state and local tax receipts in 2012 and more than $111 billion in 2020, with a total of more than $2.5 trillion in cumulative added revenues between 2012 and 2035.

The report was sponsored by API, the Institute for 21st Century Energy, the American Chemistry Council, and the Natural Gas Supply Association.


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Iran's New Oil-Gold Triangle Trade

In recent months there has been a lot of incorrect speculation that because Iran has been shut off from the petrodollar, SWIFT mediated regime, its economy will implode as the country has no access to the all important greenback and can thus not conduct international trade, the driving factor behind the international sanctions that seek to topple the local government as Iran dies an economic death.

And while there have been bouts of substantial inflation, which so far the local government appears to have managed to put a lid on by curbing gray market speculation, Iran continues to more or less operate on its merry ways with international trade most certainly taking place, especially with China, Russia and India as main trading partners.

"How is this possible" those who support the Western led embargo of all Iranian trade will ask? Simple, gold. Because while Iran may have no access to dollars, it has ample access to gold. This in itself is not new, we have reported in the pastthat Iran has imported substantial amounts of gold from Turkey, despite the Turkish government's stern denials.

Today, courtesy of Reuters, we learn precisely what the 21st century equivalent of the Great Silk Road looks like, and just how effective Iran has been as a lab rat in escaping the great petrodollar experiment, from which conventional wisdom tells us there is no escape.

Presenting "Petrogold".....Read the entire article "Iran's New Oil-Gold Triangle Trade "

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Is the Link between Gold and the U.S. Dollar in Question? Here's our Technical Setup

The $1800 per ounce level continues to be a major technical resistance area for gold. After hovering near $1800 recently, gold moved sharply away from that level last week to close at $1735 an ounce.

Despite that, more fund managers and analysts continue to point to a bright long term future for gold prices. John Hathaway of the Tocqueville Gold Fund says gold will reach new highs within a year. He based his forecast, like many others, on the fact that negative real interest rates look likely to persist as Ben Bernanke and the Federal Reserve continue to print money.

Believe it or not, some mainstream analysts are also touting gold’s potential. Merrill Lynch analysts point to the correlation (discussed in a previous article) between the price of gold and the expansion of the Federal Reserve’s balance sheet since the start of QE1 in early 2009.

Based on the current path of the Fed’s balance sheet expansion, Merrill Lynch came up with two longer term targets for the price of gold. They project gold to hit $2,000 an ounce next summer and to hit $2,400 an ounce by the end of 2014.

Another way to look at gold and the Fed is the so called gold coverage ratio. That is the amount of gold on deposit at the Federal Reserve versus the total money supply. According to Guggenheim Partners, the gold coverage ratio is at an all time low of 17%. The historical average is about 40%, meaning that gold would to more than double to reach the average.

Looking at the Fed’s balance sheet is a new and interesting way to look at and forecast gold prices. In the past, the conventional wisdom was that gold was merely an anti-dollar play: U.S. dollar down, gold up and vice versa. But that seems to be changing....

Reuters had some interesting data. The value of the U.S. dollar net short position fell to $6.43 billion for the week ended October 9. This is substantially down from the previous week’s net short position of $16.3 billion. At the same time, the “managed money” net long gold position in gold futures rose to its highest level since August 2011. That was the time when gold hit its record high of $1,920 an ounce.

So much for conventional wisdom. Both currency and gold traders are seeing this long-term relationship between gold and the U.S. dollar breaking down into a “new normal” of direct central bank intervention into financial markets. Gold seems increasingly to be turning into more of a safe haven play than an anti dollar one. It seems that more investors are worried about all fiat currencies that are burdened by huge debt loads.


The Technical Take.....

Below is a daily chart of gold futures. Looking at the price levels and analysis you can see that a bounce or bottom could form at any time now. Price of gold has pulled back in a mini five wave correction touching both our first Fibonacci retracement level of 38% and the 50 day simple moving average. This is the type of pullback that longer term investors like to add to their long gold position. While gold does have the potential to fall all the way down to $1625, in the long run it should continue to rise for the long term investor.

From a trader point of view, it may be worth a stab to get long gold with a very tight stop, but until we see a real panic selling day in gold where volume is high I don’t think the final bottom is in yet.




You can get my weekly trading analysis and trade ideas at The Gold & Oil Guy.com

Chris Vermeulen

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Crude Oil, Natural Gas and Gold Weekly Technical Outlook for Saturday Oct. 20th

It's our favorite part of the weekend, let's check in with the staff at Oil N'Gold.com and get their call on crude oil, natural gas and gold.....

Crude oil stayed in range above 87.70 last week and outlook remains unchanged. The fall from 100.42 is still in favor to continue for 61.8% retracement of 77.28 to 100.42 at 86.12 and possibly below. Though, in that case, we'd expect strong support ahead of 77.28 to contain downside. Meanwhile, break of 93.66 will flip bias to the upside for a test on 100.42 resistance.

In the bigger picture, current development suggests that price actions from 114.83 are a triangle consolidation pattern. Fall from 100.42 is likely the fifth and the last leg of such consolidation. Having said that, downside should be contained above 77.28 and bring an upside breakout eventually. Break of 110.55 will strongly suggest that whole rebound from 33.29 has resumed for 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. 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

Natural gas edged higher to 3.647 last week but upside momentum is not too convincing for the moment. Nonetheless, near term outlook stays bullish as long as 3.398 support holds. Current rally is still expected to continue to medium term channel resistance next (now at around 3.92). However, break of 3.398 will indicate that a short term top is at least formed and will turn near term outlook bearish for at least a deep pull back.

In the bigger picture, recent developments argued that medium term decline from 6.108 is completed at 1.902 already. It's bit early to confirm but bullish convergence condition in weekly MACD suggests that the down trend from 13.694 (2008 high) is possibly over too. Sustained break of the channel resistance (now at around 3.92) will set the stage for a test on 4.983 key resistance next. Meanwhile, break of 2.575 support will argue that the rebound from 1.902 is over and the medium larger down trend is still in progress for a new low.

In the longer term picture, decisive break of 3.255 resistance will be an important signal of long term bottoming reversal and could at least give a push to 4.983/6.108 resistance zone.

Nymex Natural Gas Continuous Contract 4 Hour, Daily, Weekly and Monthly Charts

Gold's fall from 1798.1 extended further last week and breached 1720 support. The development argues that rebound from 1526.7 has completed at 1798.1 already. Deeper decline would now be seen to 38.2% retracement of 1526.7 to 1798.1 at 1694.4 and below. On the upside above 1755 resistance is needed to signal short term bottoming. Otherwise, outlook will now stay mildly bearish in near term.

In the bigger picture, price actions from 1923.7 high are viewed as a medium term consolidation pattern. There is no indication that such consolidation is finished, and more range trading could be seen. In any case, downside of any falling leg should be contained by 1478.3/1577.4 support zone and bring rebound. Meanwhile, break of 1792.7/1804.4 resistance zone will argue that the long term uptrend is possibly resuming for a new high above 1923.7.

In the long term picture, with 1478.3 support intact, there is no change in the long term bullish outlook in gold. While some more medium term consolidation cannot be ruled out, we'd anticipate an eventual break of 2000 psychological level in the long run

Comex Gold Continuous Contract 4 Hour, Daily, Weekly and Monthly Charts

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Crude Oil, Natural Gas and Gold Week Ending Market Commentary

Crude oil closed lower on Friday as weak earnings spur ideas of weakening energy demand. The low range close sets the stage for a steady to lower opening when Monday's night session begins. Stochastics and the RSI are turning neutral to bearish signaling that sideways to lower prices are possible near term. If November renews the decline off September's high, the 62% retracement level of the June-September rally crossing at 87.19 is the next downside target. Multiple closes above last Wednesday's high crossing at 93.66 are needed to renew this month's rally. First resistance is last Wednesday's high crossing at 93.66. Second resistance is September's high crossing at 100.73. First support is the 62% retracement level of the June-September rally crossing at 87.19. Second support is the 75% retracement level of the June-September rally crossing at 84.29.

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Natural gas closed higher on Friday. The mid-range close sets the stage for a steady to higher opening on Monday. Stochastics and the RSI are diverging but turning neutral to bullish signaling that sideways to higher prices are possible near term. If November renews the rally off August's low, the 50% retracement level of the 2011-2012 decline crossing at 3.965 is the next upside target. Closes below the 20 day moving average crossing at 3.415 would confirm that a short term top has been posted. First resistance is today's high crossing at 3.647. Second resistance is the 50% retracement level of the 2011-2012 decline crossing at 3.965. First support is the 20 day moving average crossing at 3.415. Second support is the reaction low crossing at 3.327.

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Gold closed lower on Friday as it renewed this month's decline. The low range close sets the stage for a steady to lower opening when Friday's night session begins trading. Stochastics and the RSI are neutral to bearish signaling that sideways to lower prices are possible near term. If December extends this month's decline, the 38% retracement level of the May-October rally crossing at 1698.00 is the next downside target. Closes above the 20 day moving average crossing at 1764.70 are needed to confirm that a short term low has been posted. First resistance is the 20 day moving average crossing at 1764.70. Second resistance is this month's high crossing at 1798.10. First support is today's low crossing at 1716.00. Second support is the 38% retracement level of the May-October rally crossing at 1698.00.

Check out Gold Is Not Back In Favor Yet.....

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