Crude Oil Declines on Concern U.S. Economic Recovery May Stall

Crude oil declined, paring this week’s gain, as a gauge of U.S. manufacturing unexpectedly fell, jobless claims rose and a stronger dollar bolstered skepticism about the recovery in the biggest energy consuming nation. Oil snapped two days of increases after the number of Americans filing first time claims for unemployment benefits climbed and a report showed manufacturing dropped lower than projected by economists. Oil also fell as the dollar rose to a three week high against the euro.

“Commodities overall took a hit from that negative turn in macro sentiment, combined with the advancing dollar,” said Toby Hassall, a research analyst at CWA Global Markets PTY in Sydney. Crude oil for November delivery dropped as much as 72 cents, or 1 percent, to $70.10 a barrel in electronic trading on the New York Mercantile Exchange, and was at $70.14 at 8:54 a.m. Singapore time. Yesterday, the contract rose 21 cents to settle at $70.82.....read the entire article

Why it Pays to Think Small About Oil

It’s clear that a good investor should have some exposure to oil and gas. But you need to know where to look – and here it pays to think small, not big. There’s a problem with buying into the oil majors, such as BP and Shell. They sell so much of the stuff each day that they a face a continual, expensive challenge to replenish their reserves. But small explorers are not in this position. This is of real significance to you as an investor. Let me explain…

If a small explorer makes a good oil discovery it does not simply offset the oil that it’s selling. Instead, it takes them from a position of having no oil and consequently, a very uncertain outlook into one where they have a profitable long term future. So shareholders who look to small explorers can make big money. But where exactly should you be looking?

For me, the crucial factor is whether the explorer’s license area has the potential to host a really major reserve. That is why I like Kurdistan, home of
Gulf Keystone (GKP) which this week further increased the estimated size of its Shaikan find – and Sterling Energy (SEY). I also like the Falklands, where the licence holders are Borders & Southern (BOR), Desire (DES), Rockhopper (RKH) and Falkland Oil & Gas (FOGL)......read the entire article

Oil Price Has Little Change Depsite IMF's Upgrades

Hovering around 70, the benchmark contract for crude oil changes little ahead of US opening. IMF's upgrades on economic forecasts and OPEC's production cut in September are bullish factors but investors probably feel nervous to push oil higher after the +5.8% rally yesterday.

IMF forecasts world economy will expand +3.1% in 2010, compared with +3.1% projected in July, as driven by growths of +9% and +6.4% in China and India respectively. As stated in the report, 'the recovery has started and financial markets are healing...'in most countries, growth will be positive for the rest of the year, as well as in 2010'. However, 'to sustain the recovery, private consumption and investment will have to strengthen as high public spending and large fiscal deficits are unwound'.

For OECDs, GDP in the US, Japan and the Eurozone are anticipated to rise by +1.5%, +1.7% and +0.3%. All of these estimates have been revised upward from Julys' projections. According to Bloomberg's estimates, OPEC's crude production declined 50K bpd from August to 28.395M bpd in September as led by reductions in Iraq, Saudi Arabia and Angola. For the 11 members (excluding Iraq) that are subject to quota, total output dropped -10K bpd to 26.045M bpd in September, though the production was still higher than the target.....read the entire article and charts!

Oil Poised to Test Resistance in the Mid $70s

Crude oil is poised to enter a “bullish channel” and test resistance at the mid $70 a barrel level after rising the most in almost six months yesterday. If prices close above $71.55 a barrel, oil is set to test resistance at $75.89, according to a technical analysis by Stephen Schork, president of consultant Schork Group Inc. in Villanova, Pennsylvania.

Crude oil for November delivery rose $3.90, or 5.9 percent, to settle at $70.61 a barrel yesterday on the New York Mercantile Exchange. “If you are bearish you’ve got a problem right now,” said Schork. “If the channel holds we’ll get a re test of the low to mid-$70s, which is where resistance has held since the summer”.....read the entire article

Crude Oil Technical Analysis From Oil N Gold

Crude oil's price powerfully pushed yesterday, after the release of inventory fundamentals touching the key resistance level at almost 70.90, which forms a support level for the main breached ascending channel, previously. However, reaching this level will be accompanied by the stochastic entering an overbought areas ; thus, making us expect for today, a downside move on an intraday basis where its first main targets are around 68.00, requiring trading to remain below level 70.90, essentially. The trading range for today is among the key support at 66.20 and the key resistance at 73.15. The general trend is to the upside as far as 47.20 remains intact with targets at 85.00.....Read the entire article

Oil Declines on Concerns U.S. Economy Struggling to Recover

Crude oil in New York fell after an unexpected drop in U.S. business activity and as companies cut more jobs than estimated, adding to concerns over the pace of revival in fuel demand in the biggest energy consuming nation.

Crude oil pared some of yesterday’s 5.9 percent gain after the Institute for Supply Management Chicago Inc.’s business barometer trailed economists’ estimates. Companies in the U.S. cut payrolls by a greater than forecast 254,000 jobs, a report from ADP Employer Services showed, indicating the labor market will be slow to recover.

“The poor economic news suggests oil should not go too much higher in price, because the U.S. economy is not improving as quickly as hoped,” Mike Sander, an investment adviser at Sander Capital in Seattle, said in an e-mail. “The economy is still in dire shape”.....read the entire article

Crude Oil Chart Damage Appears to be Repaired, For Now

Crude oil closed up $3.58 at $70.29 a barrel today. Prices closed nearer the session high today. The big gains today were supported by a bullish weekly storage report from the DOE, from a lower U.S. dollar and by the recent heightened tensions between the U.S. and Iran over its nuclear ambitions. Recent serious chart damage was mostly repaired today.

Natural gas closed down 3.8 cents at $4.837 today. Prices closed near mid range today. Prices are still in a three week old uptrend on the daily bar chart. Bulls still have upside technical momentum. The next upside price objective for the bulls is closing prices above solid technical resistance at the August high of $5.133.

The U.S. dollar index closed down 41 points at 76.94 today. Prices closed near mid range today. Bears still have the solid overall near term technical advantage. Bulls' next upside price objective is to close prices above solid technical resistance at 79.00.

Crude Oil Price Reacted Mildly Positive to Less Than Expected Distiallte Stock Gain

Crude oil inventory rose +2.8 mmb, compared with consensus of +2 mmb increase, to 338.4 mmb in the week ended September 29. The good thing is Cushing stock recorded significant drop of -1.5 mmb. Situation in oil product stockpiles was better than previously anticipated. Gasoline inventory drew -1.66 mmb while distillate inventory gained only +0.32 mmb. Both readings beat market expectations.

WTI crude oil price changes little after the report, only edging slightly higher to 67.5 from 66.5 before the release. Investors probably need to gauge the implications of a higher crude build with lower distillate build. Heating oil bounces to 1.71 while RBOB gasoline rises to 1.65 after the report. Lack of positive response from investors was also driven by disappointing US employment data and Chicago PMI. ADP reported -254K decline in employment in September following a -277K drop in the prior month. The market had expected.....Read the entire article

Bloomberg Analysis: Oil’s Sideways Trend Points to $70 Breakout

Crude oil has a greater chance of rising above $70 a barrel the longer it stays in the sideways pattern that has characterized trading in the past two months, according to National Australia Bank Ltd. Oil has been locked in a band of $65 to $75 a barrel since the start of August as traders weighed optimism over the prospects for a recovery in global demand against a supply glut. As the market has held its floor, prices will soon rise, said Gordon Manning, a Sydney based analyst, citing technical charts.

“The longer we’re in a sideways pattern, when we do break out, potentially the more powerful it’s going to be,” Manning said in an interview. “I wouldn’t be surprised to see that sort of ‘kick’ from around these current levels back up to about $70. There’s more of a risk of a $3 rally than a $3 fall from here”.....Read the entire article

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Crude Oil Rises as Growth in China, Japan Buoys Demand Outlook

Crude oil rose above $67 a barrel in New York as manufacturing expanded in China and Japan, buoying hopes for a rebound in fuel demand.

Oil is nonetheless heading for its first quarterly decline this year amid swelling fuel inventories in the U.S. The Energy Department will probably report that supplies of crude and fuel increased last week, according to a Bloomberg survey. Chinese manufacturing rose for a sixth month in September and Japanese industrial output climbed for a sixth time in August.

“Emerging markets have definitely been driving the demand recovery,” said Thina Saltvedt, an analyst at Nordea Bank AB in Oslo. “Industrial production has increased. We will see a gradual improvement in the economy, but prices have got ahead of the physical fundamentals”.....Read the entire article

Hype hype, hype hype Iran

Oil prices got a bid from a rising stock market and concerns over Iran. Now, while some traders and analysts try to hype the Iran story, the truth is the odds of an imminent military conflict with Iran are being greatly exaggerated. And if we do actually get into a conflict, it is unclear as to whether or not it will have a long term impact on oil prices in a world awash in supply.

Many analysts point to the fact that the Iranians have threatened to close the Straits of Hormuz, a major choke point for global supply. The Straits are located between Oman and Iran and connects the Persian Gulf with the Gulf of Oman and the Arabian Sea. According to the Department of Energy, Hormuz is the world's most important oil choke point due to its daily oil flow.....Read the entire article

Saudi Aramco CEO: Sluggish Demand in West Not Offset by China

Oil demand remains "sluggish" throughout the developed world, and growth in China isn't making up for the loss, said Saudi Aramco CEO Khalid Al Falih. "It will take time to make up for the millions of barrels of lost demand that we have experienced," said Al Falih, the head of Saudi Arabia's state oil company, in an interview to air Monday evening on the Nightly Business Report on PBS. "But ultimately, it will come."

Saudi Arabia, the world's biggest oil exporter, is seeing its efforts pay off to hold down production within the Organization of Petroleum Exporting Countries. While supplies are higher than normal worldwide, prices are holding steady around $70 a barrel, roughly where Al Falih said it is necessary to encourage investment in new production. Al Falih was interviewed .....Read the entire article

Oil Drops as Dollar Rises, Analysts Forecast Supply Increase

Crude oil dropped as a stronger dollar reduced the appeal of commodities as an alternative investment and analysts forecast fuel supplies will climb. Oil futures have almost doubled since February as the dollar declined 17 percent and rising equity markets buoyed investor confidence. U.S. oil and fuel inventories probably increased last week amid refinery maintenance and a sluggish economic recovery.

“The dollar continues to be a leading indicator for oil prices because of the global nature of the asset,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. Crude oil for November delivery declined 13 cents to settle at $66.71 a barrel at 2:44 p.m. on the New York Mercantile Exchange. Oil prices have increased 50 percent this year. Futures fell 8.4 percent last week, the biggest drop since the week ended July 10.....Read the entire article

Crude Oil Daily Technical Outlook From ONG Focus

Break of 67.02 minor resistance indicates that an intraday low is in place at 65.05 and some consolidation could now be see. Nevertheless, recovery is expected to be limited well below 71.11 resistance an bring fall resumption. Below 65.05 will target 61.8% projection of 75.0 to 67.05 from 73.16 at 60.30 next, which is close to next psychological level of 60.

In the bigger picture, sustained trading below medium term trend line support solidifies that case that medium term rebound from 33.2, which is treated as correction whole down trend form 147.27, has completed at 75.0 on bearish divergence conditions in daily MACD and RSI. Further break of 58.32 cluster support (38.2% retracement of 33.2 to 75.0 at 59.03) will confirm this case and pave the way for a retest of 33.2 low. On the upside, break of 71.77 resistance is needed to invalidate this view. Otherwise, outlook will remain bearish.....Here is the charts!

Crude Drops on Forecast U.S. Oil, Fuel Supplies Rose Last Week

Oil fell before a report forecast to show that U.S. supplies of crude and refined oils accumulated because of a sluggish economic recovery. An Energy Department report due tomorrow will probably show crude stockpiles rose by 1 million barrels last week, according to the median estimate of nine analysts surveyed by Bloomberg News. Gasoline and distillate fuel inventories also increased, the survey said.

Oil prices have gained 50 percent this year as a weaker dollar boosts the appeal of crude as a currency hedge. “With energy fundamentals still uninspiring, prices should remain confined to the $65-$75 trading range for some time to come,” said Edward Meir, an analyst with MF Global Ltd. in Darien, Connecticut. “The dollar’s decline seems to have stalled” and.....Read the entire article

Bottom Pickers Push Crude Oil Higher, Natural Gas Pulls Back

Crude oil closed up $0.89 at $66.91 a barrel today. Prices closed nearer the session high today on short covering and speculative bottom picking. Prices Friday hit a fresh nine week low. Serious near term chart damage has been inflicted recently as prices have seen a bearish downside "breakout" from a trading range at higher price levels.

Natural gas closed down 11.6 cents at $4.832 today. Prices closed nearer the session low today on profit taking. Prices Friday hit a fresh six week high. Prices are in a three week old uptrend on the daily bar chart. Bulls have upside technical momentum.

The U.S. dollar index closed up 21 points at 77.23 today. Prices closed nearer the session high today on more short covering in a bear market. Bears still have the overall near term technical advantage.

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BP, Kuwait to Build Refinery in China

Energy giant BP (BP) is collaborating with Kuwait to build a $9 billion refinery venture in southern China. The facility, in China's Guangdong province, would have a refining capacity of 300,000 barrels per day.

The facility would be 30 percent owned by KPI, Kuwait's state run oil company. Chinese refiner Sinopec (SHI) would have a 50 percent stake, while Dow Chemical (DOW) and Shell (RDS.A) (RDS.B) would each take a ten percent stake. Work on the refinery is expected to commence by March of 2010.

Natural Gas Feint Means Prices Poised to Plummet 19%

The steepest rally in natural gas prices since 2006 is coming to an end as the 400 salt caverns, depleted oil fields and aquifers used to store the fuel in the U.S. reach capacity for the first time. Stockpiles may surpass the record of 3.545 trillion cubic feet by as much as 350 billion cubic feet this fall, Energy Department estimates show. Gulf South Pipeline Co. says its fields in Louisiana and Mississippi are so full that customers will have to pay penalties for exceeding their limits. With no place to go, producers will be forced to dump excess fuel on the market.

The worst economic slump since the 1930s will cut demand from chemical plants to carmakers to households by 2.4 percent this year, according to government estimates. The November futures contract will drop about 19 percent to near $4 per million British thermal units, said Stephen Schork, president of consultant Schork Group Inc. in Villanova, Pennsylvania.....Read the entire article

USO, UNG, SPY Trading Charts From The Gold and Oil Guy

The market continues to whipsaw traders out of positions as volatility rises. I have put together a few charts to show you where USO and UNG are trading along with the SPX (SP500 index).

USO Crude Oil Trading Fund
Crude oil started to bleed lower last week as the price sliced through the multi month support trend line. Volume shot up as stop orders get triggered on the way down. We finally have a move outside of the pennant formation that has been in place for several months. Now we can start looking for a low risk setup for trading crude oil again.


UNG Natural Gas Trading Fund
Natural gas has really come back to life. I mentioned on September 2nd that natural gas (UNG) looked like a buy between $9 – $9.50 and it has now rallied 25% since that point. But stepping back and looking at the chart we can see resistance is hovering over head between the $12 – $12.25.

I may send out a setup for a short play if we get one but I feel the heavy sell off in August was the final wave down, flushing out traders. Speculative traders seem to have moved into natural gas and I think they will continue to buy it for some time. Pullbacks will be sharp but most likely followed with more buying as we enter the cooler months of the year.


SPX Index Trading
I thought that I would show a quick picture of the SPX because it shows the psychology of traders and how it repeats it’s self over and over. The black and green waves are virtually the same patterns.

I feel as though the market is ready for a larger pullback than what we had in June/July but my focus will be to buy in the oversold dips and lighten my positions in overbought conditions (scaling in and out of positions) until the trend confirms it has reversed.


My Market Trading Conclusion:
Gold stocks are pulling back and precious metals continue to move with the overall market action. I do feel that gold and silver will break this relationship and start to move higher in the coming months but until that happens I remain cautious with my positions tightening my stops.

Crude oil is starting to come alive and I am now looking for some low risk setups for energy related funds. Last week’s technical breakdown could provide us with a big move in the coming months.

Natural Gas continues to hold up but is now trading near resistance. Depending how many spec traders there are still lingering around (as most lost their shirts in the recent months), will dictate how much higher natural gas will move. The 25-30% rally in the past month has been very powerful and this could be just the beginning. I am now waiting for another setup that could be a long or a short trade depending on what happens next.

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