Crude Oil Demand Picking up on China and U.S. Growth

Global oil demand this year is expected to accelerate at nearly double 2012's pace as stronger economies in China, Latin America and the U.S. offset sluggishness in Europe, according to the Economist Intelligence Unit.

Consumption worldwide will average nearly 91 million barrels a day in 2013, up 1.5% from about 89.7 million barrels a day in 2012, Economist Intelligence Unit analysts said in an updated monthly forecast. Estimated 2013 consumption would be an all time high for any year, based on industry data. Last year's use was up 0.8% from 2011.

Among the wealthiest nations and regions, demand trends for the European Union and the U.S. probably will diverge. The U.S. is now expected to post "modest, but still positive, growth… as the economy there stabilizes," the report said. Meanwhile, "recession continues to bite" in the EU, causing further contractions in demand.

U.S. demand is projected to grow 0.1%, compared with the small contraction the group estimated previously. EU consumption is forecast to decline 0.8%, while China's demand will climb an estimated 4.5%, to an average of 9.97 million barrels a day.

Read the entire "The Economist" report
 

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Update on Todd's RHT Trade and A New JOY Global Long Trade

In today’s video COT contributor Todd Mitchel show us where he is trailing his stop up to lock in more profits in the RHT (Red Hat, Inc.) stock trade, which by the way is doing exactly what he said it would do. He will then discuss another long stock trade (JOY = Joy Global, Inc.) that he put on yesterday afternoon at 63.21.

This trade is working out very nicely too.....80% of the first profit objective has already been hit at 65.17 (+1.96 point profit per share already) – and now his trailing stop has already been moved up to 63.60 locking in .39. So, regardless what JOY does from here, he came out way ahead and the trade is a winner. Be sure to watch the entire video for all the details and have a fantastic weekend!

Watch "Update on Todd's RHT Trade and A New JOY Global Long"


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Are Natural Gas Prices Headed Lower?

The natural gas futures contract has been trying to push higher since the immediate sell off after yesterday's EIA inventory release. However, as of this writing it looks like that effort is starting to wane.

Aside from the fact that yesterday's net withdrawal from inventory was bullish versus last year and the five year average for the same week it is not going to be repeated in next week's inventory based on the warm spell this week. In addition the inventory withdrawals for the next several weeks are likely to underperform versus history basis the latest NOAA six to ten day and eight to fourteen day forecast which both remain bearish.

The six to ten day forecast covering the period Feb 6 to the 10th is projecting above normal temperatures across the eastern two thirds of the country with the mid west expecting strongly warmer temperatures. The eight to fourteen day forecast is marginally less bearish in that the above normal temperatures are forecast for the eastern half of the country for the period February 8th through the 14th.

As it looks at the moment the first half of the February will likely experience less than normal levels of heating demand for the first half of February and thus not supportive of higher prices or at least not supportive of the market breaking out of the upside of the trading range (about $3.50/mmbtu) during that period.

Read Dominick Chirichella entire article and great chartwork.



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Chevron Reports Fourth Quarter 2012 Earnings

Chevron Corporation (NYSE: CVX) today reported earnings of $7.2 billion ($3.70 per share – diluted) for the fourth quarter 2012, compared with $5.1 billion ($2.58 per share – diluted) in the 2011 fourth quarter. Results in the 2012 period included a gain of $1.4 billion from an upstream asset exchange.

Full year 2012 earnings were $26.2 billion ($13.32 per share – diluted), down 3 percent from $26.9 billion ($13.44 per share – diluted) in 2011. Sales and other operating revenues in the fourth quarter 2012 were $56 billion, down from $58 billion in the year ago period, mainly due to lower crude oil volumes.

“Chevron delivered another very strong year in 2012,” said Chairman and CEO John Watson. “Our upstream portfolio continues to produce excellent results. We’ve now led the industry in earnings per barrel for over three years. Our downstream businesses also delivered highly competitive earnings per barrel.”

“Strong cash flows allowed us to invest aggressively in our major capital projects and to acquire several important, new resource opportunities. We also raised the dividend on our common shares for the 25th consecutive year and continued our share repurchase program, both of which demonstrate our commitment to providing near term, top tier returns to our shareholders”.....Read the entire Chevron earnings report.


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Exxon Mobil Corporation Announces Fourth Quarter 2012 Results

ExxonMobil [XOM] reports fourth quarter 2012 earnings were over $9.9 billion, up 6% from the fourth quarter of 2011. Full year 2012 earnings were $44.9 billion, up 9% from 2011, with record earnings per share of $9.70.

Capital and exploration expenditures were a record $39.8 billion in 2012 as they continue pursuing opportunities to find and produce new supplies of oil and natural gas to meet global demand for energy.

Capital and exploration expenditures were $12.4 billion, up 24% from the fourth quarter of 2011. Oil equivalent production decreased 5% from the fourth quarter of 2011. Excluding the impacts of entitlement volumes, OPEC quota effects and divestments, production decreased 2%.

Cash flow from operations and asset sales was $14.0 billion, including proceeds associated with asset sales of $0.8 billion. Share purchases to reduce shares outstanding were $5 billion. Dividends per share of $0.57 increased 21% compared to the fourth quarter of 2011.....Read the entire ExxonMobil earnings report.


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National Oilwell Varco Announces Fourth Quarter and Full Year 2012 Earnings

National Oilwell Varco (NYSE: NOV) today reported that for the fourth quarter ended December 31, 2012 it earned net income of $668 million, or $1.56 per fully diluted share. Earnings improved nine percent compared to the third quarter of 2012, and improved 16 percent compared to the fourth quarter of 2011.

Excluding $51 million in pre-tax transaction charges and a net $69 million tax benefit related to certain U.S. foreign tax credits in the fourth quarter of 2012, net income was $638 million, or $1.49 per fully diluted share, down two percent from the third quarter of 2012, and up nine percent from the fourth quarter of 2011, excluding transaction charges from all periods.

The net $69 million tax benefit resulted from a strategic reorganization of certain foreign operations to more fully integrate recently acquired business groups. Revenues reported for the full year 2012 were $20.04 billion, and net income was $2.49 billion, or $5.83 per fully diluted share. Operating profit for the full year 2012 was $3.55 billion......Read the entire NOV earnings report.


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CME Group: Natural Gas Inventory Withdrawal Below Market Consensus

Today's natural gas inventory came in below the market consensus but still above both last year and the five year average for the same week. The market has viewed the data as bearish in that the market is off about 2% as of this writing. It also supports my view that I have discussed in the newsletter that yesterday's gain in prices were mostly driven by a short covering rally ahead of the expectation for a bullish inventory report today. Another way of looking at the reaction is a buy the rumor, sell the fact pattern.

Next week's inventory report is going to be based on a period that has experienced very warm weather over a major portion of the eastern half of the US and thus the inventory withdrawal is likely to underperform versus history. The latest NOAA six to ten day and eight to fourteen day forecasts remain bearish as they are both projecting above normal temperatures over a major portion of the US for the period February 4th through the 13th.

Inventory withdrawals are likely to underperform versus history during the aforementioned timeframe. With the longer range forecast projecting March to experience above normal temperatures over most of the US.... a sort of early spring.... that does not leave much potential for a sustained winter cold spell. The fundamentals remain bearish and are likely to stay bearish based on the current weather forecasts for the rest of the official heating season which end at the end of March.

Read the entire CME Group article and see Dominick Chirichellas detailed charts.


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Musings: Hydraulic Fracturing Issue Encounters Protests And Movies

On Friday, January 11th a 30 day public comment period in New York State on the issue of hydraulic fracturing ended, but not without a certain amount of high drama. The wife and son of the late Beatles star John Lennon, Yoko Ono and Sean Lennon, led a group of protestors on a visit to the Albany office of New York Governor Andrew Cuomo (Dem) and the Department of Environmental Conservation. At the latter stop, the duo, who founded Artists Against Fracking last July, delivered 50 boxes reportedly containing 204,000 comments about hydraulic fracturing.

Around the same time, Ms. Ono had an op-ed published in the Albany Times Union in which she wrote, "My husband, John Lennon, and I bought a beautiful farm in rural New York more than 30 years ago. Like the rest of our state, this peaceful farming community is threatened by fracking for gas. She went on to say, “Governor Cuomo, please don’t frack New York. Don’t allow our beautiful landscapes to be ruined, or our precious and famous clean water to be dirtied."

Read the entire Musings article



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Kinder Morgan [KMP] to acquire Copano [CPNO] for Approximately $5 Billion

Kinder Morgan Energy Partners (NYSE: KMP) and Copano Energy (NASDAQ: CPNO) on Tuesday announced a definitive agreement whereby KMP will acquire all of Copano’s outstanding units for a total purchase price of approximately $5 billion, including the assumption of debt. The transaction, which has been approved by the boards of directors of both companies, will be a 100 percent unit for unit transaction with an exchange ratio of .4563 KMP units per Copano unit.

The consideration to be received by Copano unitholders is valued at $40.91 per Copano common unit based on KMP’s closing price as of Jan. 29, 2013, representing a 23.5 percent premium to Copano’s close on Jan. 29, 2013. The transaction, which is expected to close in the third quarter of 2013, is subject to customary closing conditions, including regulatory approval and a vote of the Copano unitholders. TPG, Copano’s largest unitholder (owning over 14 percent of its outstanding equity), has agreed to support the transaction.

Copano, a midstream natural gas company with operations primarily in Texas, Oklahoma and Wyoming, provides comprehensive services to natural gas producers, including natural gas gathering, processing, treating and natural gas liquids fractionation. Copano owns an interest in or operates about 6,900 miles of pipelines with 2.7 billion cubic feet per day (Bcf/d) of natural gas throughput capacity and 9 processing plants with more than 1 Bcf/d of processing capacity and 315 million cubic feet per day of treating capacity.

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Energy Stocks & Crude Oil Special Trend Analysis Report

Crude oil has been trading ways for the past year between the 2011 high and low. The trading range through 2012 has been contracting with a series of lower highs and higher lows. This pennant formation because it is taking place after an uptrend is a bullish pattern with $110 and possibly even $140+ per barrel in the next 6-18 months.

If you look at the weekly investing chart of crude oil the key support and resistance levels area clearly marked. A breakout of the white pennant will trigger a move to the next support or resistance level. And judging from the positive economic numbers not only form the USA but globally the odds are increased for the $110+ price target to be reached sooner than later.

Crude Oil Price Chart – Weekly Investing



Crude Oil Price Chart – Daily short term Analysis and Target

If we zoom into the daily chart and analyze price and volume you will notice the $100 per barrel level is potentially only 2-3 days way… But keep in mind whole numbers (decade & Century Numbers) naturally act as support and resistance levels. So when the $100 century price is reached there will be a wave of sellers with fat thumbs who will slam the price back down to the $96 and possibly back down to the $92 level before oil continues higher.



Utility Stocks – XLU – Weekly Investing Chart

The utility sector has done well and continues to look very bullish for 2013. This high dividend paying sector is liked by many and the price action speaks for its self



Energy Sector Weekly Investing Chart

Energy stocks which can be followed using the XLE exchange traded fund (ETF) typically leads the price of oil. Looking at energy stocks we can see that they are outperforming the price of crude oil and on the verge of breaking out of a large Cup & Handle pattern. If so then $90 is the next stop but prices may go much higher in the long run.



Energy Stocks and Crude Oil Conclusion:

In short, crude oil is stuck in a large trading range much like gold and silver which I just wrote about here...."Precious Metals & Miners Making Waves and New Trends"

Once a breakout takes place on either the white or yellow lines on the first crude oil weekly chart we should see oil, energy and utility stocks start making some big moves. Depending on the direction of the breakout (Up or Down) it must be played in that direction to generate substantial profits obviously.

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Chris Vermeulen


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