Crude Oil Weekly Technical Outlook For Saturday Oct. 2nd

Crude oil's rise from 72.75 accelerated to as high as 81.75 last week and the development suggests that whole rise from 70.76 is not corrective in nature. In other words, rise from 70.76 is resuming whole rebound from 64.23 and should extend beyond 82.97 resistance. Initial bias is on the upside this week and further rise should be seen to 161.8% projection of 70.76 to 78.04 from 72.75 at 84.53. On the downside, below 79.70 will turn intraday bias neutral and bring consolidations. But downside should be contained by 4 hours 55 EMA (now at 77.32) and bring another rise.

In the bigger picture, the stronger than expected rally from 70.76 dampened the immediate bearish view and suggests that rise from 64.23 is still in progress. Nevertheless, we're still favoring the case that medium term rally from 33.2 is already completed at 87.15. Hence, strong resistance should be seen as crude oil enters into resistance zone of 82.97/87.15 and bring reversal. We're still expecting another fall to 60 psychological level (50% retracement of 33.2 to 87.15 at 60.18).

In the long term picture, current development suggests that rebound from 33.2 is finished at 87.15, inside 76.77/90.24 fibo resistance zone as expected. Our view is that fall from 87.15 would develop into the third falling leg of the whole correction from 147.27 and hence, we'd anticipate an eventual break of 33.2 low in the long term as such correction extends.

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Keith Schaefer: My #1 Question....When Should I Invest in Natural Gas?

A Contrarian View of the Gas Market....and 4 Questions To Ask Yourself

It is, by a longshot, the most frequently asked question among OGIB readers over the last two years....“When should I buy natural gas? And should I buy ETFs? Future contracts? Natural gas producer stocks? I’ll tell you my thoughts, and I’ll also give investors four questions to ask the management teams of their natural gas producers that could help you protect your investment. The culprit of these low prices is the highly profitable shale gas plays that have grown very quickly all over North America. Shale gas wells often pay out very quickly, on an operating cost basis. The team writing the energy daily letter at National Bank in Canada had an interesting take on gas yesterday that mirrored my thoughts.

“Finally, the conventional wisdom that appears to be growing in the gas market is that the market is poised for a significant rally because of the overwhelmingly bearish mood and the fact that there are no buyers anymore out there for gas. “We would agree if in fact there were no buyers out there for gas. “But there are buyers, ETF investors (in a big way at these low prices), Reliance Industries, Mitsui, KoGas, Statoil, China National Petroleum Corporation, BG Group and Shell to name a few. Once these capital injections cease, the time will be right to become very bullish on gas. The key is to be the first one to recognize this phenomenon…or at least not the last.” The companies they named are large foreign producers who have paid big money to farm into shale plays just to learn the technology.

In 2009, the investment bankers were able to raise money for even the junior gas companies that were unhedged. Raising money for senior or intermediate producers was even easier. And just as the buy side institutions that bought those financings became wary of a long time of low gas prices, the industry was able to get capital from these international players.

Until all these sources of capital dry up and natural gas producers are feeling more forced to curtail production, gas prices could remain this low or lower. The good news is that with these low prices, producers can’t hedge good prices for 2011, like they could last year for their 2010 production.

So what does this mean for retail investors, how can we use that information to protect or increase the value of our portfolio? The answer is, know your investments, and here are four questions to ask management. Investors in the junior gas weighted stocks, in both Canada and the US, should be very cautious now.

First investors should check if their company’s are near their debt ceiling, and there are lots who are, because these companies can’t raise money (equity; or issue shares) now. They only have their debt line and cash flow. And net cash flow right now is very low for these producers.

Second, investors should ask management if they would have to take any reserve writedowns if the independent evaluators came in to do their calculations at today’s prices. A company’s reserves are their assets from which they can secure lending against. If those reserves were economic last December 31, they might not be this year at these lower prices, we have yet to see any meaningful rally in gas prices this fall, compared to last year. And reserves are This which would mean they may have to suddenly sell assets or do very dilutive financings at very low share price just to stay alive.

Third, investors should also be checking if their natural gas weighted investments are reducing production, which is good for preserving cash but generally not for the stock price. The market pays for growth, not contraction.

Energy consultants Ziff Energy recently said that junior producers should not be spending any money, in order to preserve capital during this time when full cycle costs, where you amortize everything into your costs of production, are almost twice what the current gas price is in Canada, and 50% higher than current spot price in the US.

Fourth, ask management what their plan is to survive an even longer period of low natural gas prices if they are unhedged. It’s your company and it’s your money.


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Commodity Corner: A Banner Week for Crude Oil and Gasoline

Thanks to a weaker dollar and positive Chinese manufacturing news, the front month crude oil contract price surged to its highest point in nearly two months.

The price of a barrel of crude settled at $81.58, a $1.61 gain from the previous day. The greenback continued its slide against the euro, making oil a better value for traders. Also, an important indicator of China's manufacturing growth, supported oil. The China Federation of Logistics and Purchasing reported a 4.1% increase in its Purchasing Managers Index (PMI) from August to September. In the U.S., however, the Institute for Supply Management's own PMI experienced a 1.9 percentage point drop to 54.4 during the same period. According to ISM, the manufacturing sector and the overall economy continue to grow but at slower rates.

The intraday range for oil Friday was $79.70 to $81.47. Oil ended the week up 6.6%.

Natural gas prices, meanwhile declined as a result of a mild weather forecast and abundant inventories. November gas futures fell seven cents to settle at $3.80 per thousand cubic feet. Natural gas, which traded from $3.79 to $3.87 Friday, is unchanged for the week.

Gasoline for November delivery capped off an impressive week by settling at $2.09 a gallon, a five cent improvement from Thursday. The front month gasoline price traded from $2.03 to $2.09, and it ended the week up 7.2%.

Courtesy of the Rigzone Staff

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Is it Really Time to Get on The Gold Band Wagon? Try this ETF Instead

Retail investors are flooding into gold. And it's no surprise with Gold (GLD) reaching all time highs again this week more investors are putting cash into anything precious metal related but I am here to caution you on doing so. There are far better opportunities than gold right now and chasing this trend is not the formula for generating short term growth. We have traded GLD call options 8 times this year (7 profitable) in the ETF TRADR portfolio but now it’s time to step away. Of course, what type of ‘tradr’ would I be if I failed to offer a better alternative.

First off, it would be very difficult to find a long term chart more strong and persistent than the Gold chart, it’s nothing short of amazing (and at the same time scary for the future of the dollar). That said, even as Gold has made new highs in recent days there is a better place to focus your trading capital. The semiconductor industry has lifted off in recent days and I expect it to continue. Here’s the performance chart between the headline making Gold (GLD) rally and the Semiconductor ETF (SMH).

So what’s making the semis perform so well? It’s certainly not the lackluster outlook from PC manufacturers who continue to see challenges ahead. It was just three weeks ago when Intel (INTC) slashed their outlook sending the stock down nearly 4%. Others like Cisco have also expressed concern with speak of “unusual uncertainty” in the global economy that could impact sales.

If these headlines weren’t enough many analysts also believe Apple’s iPad is hurting sales of the Semiconductor Industry because the chip is Apple branded and made by Samsung who is not a major Semiconductor. The major players are not benefiting from this particular increase in chip demand. Bottom line, here’s what is making semiconductors (SMH) move.

If you want real time ETF and ETF Option recommendations start here by signing up for our Freemium TRADR .

In a classic contrarian move Semiconductors shifted in to high gear directly after the industry leader (INTC) lowered their outlook. SMH has one of the strongest ETFs trends in September and I believe it will continue. Let’s take a look at the SMH charts to see the how the ETF is trading. We’ll take a look at the following:
Current Trend Analysis (how strong is this trend and how much further can it go) Resistance and Support Levels. How to Enter with a Lower Risk Profile.

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A Perfect Weekend for “The 52-week New Highs on Friday Rule”

From guest blogger Adam Hewison .....

We published this trading rule on our blog almost 8 months ago, February 10 to be exact. You can look it up if you wish. With gold making all time highs on Friday, it seems like the perfect candidate for this rule. Just remember, there are no guarantees in trading and you want gold to close at or near its highs for the day.

I learned this rule over 3 decades ago in the markets from a low key trader named Bill. Using his special trading technique, Bill made millions and millions of dollars from his office. The best part is that this technique is still working more than 30 years after it was taught to me and why I insist on sharing it with as many traders as possible.

Bill didn’t even have a name for this killer trading technique and so I named it, “The 52-week new highs on Friday rule”.

This technique has been working with amazing regularity. In the video, I show you that when a market is closing at a 52 week high on a Friday, you should go long. In case you missed it, and all of the rules, you can watch here.

When I hear people say that things have changed in the market and that they are completely different from what they used to be, I have to disagree. I think this is a good example why.
As always, our videos are free to watch and there are no registration requirements. Have you traded using the “52 week Friday rule”? If so, let us know how it went, but regardless of whether you have or not, leave your comments below.

Just click here to learn this trading secret and please take a minute to leave a comment and let us know what you think.

P.S. Here are the 52 WEEK RULES
Here are the three rules you need to trade “The 52-week new highs on Friday rule”
These are the exact rules that Bill used to make millions
Rule number 1: On a new 52-week high, when the market closes at or close to its high on a Friday, buy long and go home long for the weekend.
Rule number 2: Exit the long position on the opening the following Tuesday.
Rule number 3: If the market opens lower on Monday, exit the position immediately.
There you have it. These are the only three rules you need to trade with “The 52-week new highs on a Friday rule” successfully.
“The 52 week new highs on a Friday rule” works extremely well in futures and in the Forex markets. This rule can be reversed for “The 52 week new lows on a Friday rule” if you are so inclined to trade the short side of the market. The same rules apply.



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The Chinese are Rockin....Repsol to Sell Brazil Assets to Sinopec for $7.1 Billion

In one of the largest Chinese oil acquisitions to date, Spain's Repsol Friday announced the sale of 40% of its Brazilian assets to China Petrochemical Corp., or Sinopec Group, for $7.1 billion. The joint venture, valued at $17.8 billion overall, guarantees Repsol key funding to explore vast and coveted offshore oil fields in South America's biggest economy.

The transaction is also another sign of China's growing prominence on the international energy scene, as it expands its access and ownership of raw materials needed to back the country's economic expansion. The biggest oil takeover by a Chinese firm to date has been Sinopec Group's $7.2 billion acquisition in 2009 of Addax Petroleum Corp., based in Switzerland, only slightly more than the venture announced Friday.

The joint Brazilian operation stands as one of Latin America's largest foreign controlled energy ventures, as it will develop some of the world's most important exploratory discoveries in recent years, Repsol said in a filing with the stock market regulator. Repsol will have controlling interest in the joint venture with a 60% share. At the center of the deal is Repsol's holdings in the coveted subsalt area offshore Brazil, which had been anticipated to constitute a long term cashcow for the Spanish oil giant.

The subsalt play is exceptionally expensive because the oil is found in water depths of more than 2,000 meters and several thousand meters further under the sea bed below layers of sand, rocks and salt. Repsol has said previously that bringing its Brazilian subsalt oil finds into production could cost between $10 billion and $18 billion. Friday's deal eliminates the need for an initial public offering of its Brazilian stake they company had contemplated, Repsol said. "With this new investment, Repsol Brasil is fully.....Read the entire article.


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Crude Oil Technical Outlook For Friday Morning Oct. 1st

Crude oil was higher overnight as it extends this week's rally. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term.

If November extends the rally off last week's low, the 87% retracement level of August's decline crossing at 82.41 is the next upside target. Closes below the 20 day moving average crossing at 76.69 would confirm that a short term top has been posted.

First resistance is the overnight high crossing at 81.08
Second resistance is the 87% retracement level of August's decline crossing at 82.41

Crude oil pivot for Friday morning is 79.23

First support is the 20 day moving average crossing at 76.69
Second support is last Thursday's low crossing at 73.58



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If It Wasn`t Oil, The Session Would Have Been Perfect...

From guest blogger Henrique M. Simoes.....

I was scared earlier on when the economic data points came out, all higher then expectations (remember, I was short ES). I thought to myself, "if the indexes do not reverse I am going to have the worst trading session of the year...". But I was calm and detached, and when I saw the hesitations in the morning rally, plus some timid dollar rallies, I stepped in and sold a few more eMini`s. It was the only play possible.

Unfortunately, the oil rally did not abate and I left a few gold bars in the oil pits today. Someone is buying Moet&Chandon on me tonight. We can`t always win, can we? It was a rough day. I will need 5 or more trading sessions to get back...

I closed almost all my positions as I want to start trading tomorrow with a clean sheet. No bias, no prepositions.

Henrique M. Simoes can be reached at traderhms@gmail.com


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Phil Flynn: Exporting America!

A surprise drawdown in gasoline supply as the US becomes an exporter of more products as refiners sink deep into seasonal maintenance. Strong data out of China helped offset concerns about European sovereign debt. Add to it a weak dollar and you have created the right condition for an energy rally. Also of note China has now surpassed the United States as the biggest consumer of Saudi oil yet we may see some slowing as China takes steps to bring down exploding property prices.

Inventories seemed to be the major driving force for yesterday steady methodical rally. The EIA reported that motor gasoline inventories fell by a shocking 3.5 million barrels last week even as gasoline production increased to 9.2 million barrels a day and refinery runs scrapped the bottom at 85.8 %.It is clear that the US is exporting more gas and diesel as demand stagnates here and is robust in other places. The EIA shows that four moving average for gas demand is averaging 9.1 million barrels per day which is up just 0.9% from last year percent from the same period last year.

Yet gasoline supply fell as refiners look overseas. The US is now a net gasoline exporter for the first time since 1961. Reuters News reported today, “US oil refiners are shipping fuels to foreign markets to restore profits battered by sputtering domestic demand, signaling a historic shift in the global oil trade. Gasoline guzzling Americans have cut consumption while emerging markets including nearby Latin America have seen demand grow beyond the capacity of local refineries.....Read the entire article.



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Mid-Week Market Report on SP500, Crude Oil, Gold & Dollar

Wednesday the market didn’t tell us anything new. The equities market is still over extended on the daily chart but the market is refusing to break down. Each time there has been seen selling in the market over the past two weeks, the market recovers. Equities and the dollar have been trading with an inverse relationship and it seems to drop every in value each selling pressure enters the market, which naturally lifts stocks.

That being said, sellers are starting to come into the market at these elevated levels and it’s just a matter of time before we see a healthy pullback/correction. The past 10 session volatility has been creeping up as equities try to sell off. There will be a point when a falling dollar is not bullish for stocks but until then it looks like printing of money will continue devaluing of the dollar to help lift the stock market. Some type of pullback is needed if this trend is to continue and the markets can only be held up for so long.

Below is a chart of the USO oil fund and the SPY index fund. Crude has a tendency to provide an early warning sign for the strength of the economy. As you can see from the April top, oil started to decline well before the equities market did. This indicated a slow down was coming.

The recent equities rally which started in late August has been strong. But take a look at the price of oil. It has traded very flat during that time indicating the economy has not really picked up, nor does it indicate any growth in the coming months. This rally just may be coming to an end shortly.

This daily chart of the SP500 fund shows similar topping patterns. This looks to be the last straw for the SP500. Most tops occur with a gap higher or early morning rally reaching new highs, only to see a sharp sell off by the end of the session which generates a reversal day. From the looks of this chart that could happen any day.

In short, volume overall in the market remains light which is why we continue to see higher prices. Light volume typically gives the stock market a positive bias while Sell offs require strong volume to move lower. That being said every dip in the equities market which has been close to a breakdown seems to get lifted back up by a falling dollar, but that can only happen for so long because one the volume steps back into the market the masses will be in control again.

You can get my ETF and Commodity Trading Signals if you become a subscriber of my newsletter. These free reports will continue to come on a weekly basis; however, instead of covering 3-5 investments at a time, I’ll be covering only 1. Newsletter subscribers will be getting more analysis that’s actionable. I’ve also decided to add video analysis as it allows me to get more info across to you quicker and is more educational, and I’ll be covering more of the market to include currencies, bonds and sectors. Before everyone’s emails were answered personally, but now my focus is on building a strong group of traders and they will receive direct personal responses regarding trade ideas and analysis going forward. Due to more analysis and that I want to keep the service personal the price of the service will be going up Oct 1st, so join today.

Let the volatility and volume return!

Chris Vermeulen
The Gold And Oil Guy.Com
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Where is Crude Oil and Gold Headed on Thursday?

CNBC's Sharon Epperson discusses the day's activity in the commodities markets, including gold's new high, and looks at where oil and gold may be headed tomorrow.



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Stock Market and Commodities Commentary For Wednesday Evening Sept. 29th

The U.S. stock indexes closed mixed today. The indexes earlier this week hit fresh multi month highs. Bulls still have upside near term technical momentum. We are half way through the historically bearish period from September to October, and the stock indexes have so far performed very well. It is my bias that if this autumn were to see serious market turbulence, it would likely have occurred during September. I would not be surprised to see the stock indexes rally during October and then trade sideways and choppy into the end of the year.

Crude oil closed up $1.53 at $77.71 a barrel today. Prices closed nearer the session high today following a bullish weekly U.S. stocks report. Bulls have gained the near term technical advantage in crude. The next near term upside price objective for the bulls is producing a close above solid technical resistance at the September high of $78.86 a barrel.

Natural gas closed up 1.4 cents at $3.965 today. Prices closed near the session high today in quiet trading and saw more tepid short covering in a bear market. The bears still have the solid overall near term technical advantage. The next upside price objective for the bulls is closing prices above solid technical resistance at the September high of $4.298.

Gold futures closed up $3.20 at $1,311.60 today. Prices today closed near mid range today and scored another fresh record high. A weaker U.S. dollar and more safe haven buying interest boosted gold again today. Gold bulls have the solid overall near term technical advantage. There are still no early technical clues to suggest a market top is close at hand in the gold market. Prices are in a two month old uptrend on the daily bar chart.

The U.S. dollar index closed down 23 points at 78.97 today. Prices closed near mid range today and hit another fresh eight month low. Bears have the solid overall near term technical advantage. There are no early clues to suggest a market bottom is close at hand. Bulls' next upside price objective is to close prices above solid technical resistance at 81.00.

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Musings: Marcellus Shale....Good News Critique

In the last issue of the Musings, we wrote about good news and bad news for the development of the Marcellus gas shale deposit extending across New York, Pennsylvania, West Virginia and eastern Ohio. This deposit with its multiple shales is considered to be potentially the largest gas deposit in the United States. It’s economics are challenging as the area is hilly, the road access is less than ideal, the land holdings are fractured and the public is not necessarily enamored with oil and gas drilling activities, especially hydraulic fracturing, which is key to the successful development of gas shale deposits. Low natural gas prices are potentially the biggest hurdle for Marcellus gas profitability.

Our article discussed the recently released 12 month natural gas production data for wells in the Pennsylvania portion of the Marcellus through June. The data showed average cumulative production for Marcellus horizontal wells in the 5 county core area of the North Central and Northeast part of Pennsylvania. The new data shows solid production results, and in fact, the average well’s production slightly exceeded the expected production suggested by Chesapeake Energy (CHK-NYSE) in a 2008 investor presentation. That chart was presented to show the company’s anticipated well economics for its foray into the region. Pennsylvania has a long history of oil and gas having been the cradle of the U.S. oil business with.....Read the entire article.

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Phil Flynn: Peak Oil Mirage

The closer we get to peak oil the further it goes away. As high prices collapsed when the global economic system fell apart the world is now awash in oil. Back around the beginning of this decade Fed Chairman Allan Greenspan warned that peak natural gas production in this country could put us in a competitive disadvantage.

Now it appears that some of the same ideas that took us from peak natural gas to an abundant supply could also change the supply outlook for oil. The Financial Times is reporting that, “A band of entrepreneurial oilmen have found an economic way to extract oil from shale rock, fuelling a frenzy for prospects that has pushed up lease prices and lifted hopes of the first rise in onshore US oil production in decades”.

The Times says, “These small independent oilmen had used hydraulic fracturing and horizontal drilling to triple estimates of US natural gas supplies and are now applying that same technology to get oil from shale rock”. The FT says that the method could add one million barrels of oil a day to US supplies in five to eight years replacing 10 percent of US crude imports. And that might just.....Read the entire article.

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Do You Really Understand How To Use Fibonacci Retracements

Do you know how to use the Fibonacci tool in your trading. I mean, do you REALLY know how to use it. We have had a number of requests to do a video on Fibonacci retracements and how they can be used in trading.

We put together this five minute lesson on Fibonacci trading and how we use this important tool to determine turning points in the market. Like all tools, it has its flaws and should be used with other complementary tools like our "Trade Triangle" technology.

As always, our videos are free to watch and there are no registration requirements. We hope you have the time to comment and share if this video helped you understand this important trading tool, or how you're already using it.

We hope you enjoy this brief lesson and it helps you understand how to use this important tool.


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Crude Oil Daily Technical Outlook Wednesday Morning Sept. 28th

Crude oil was higher overnight as it consolidates above the 20 day moving average crossing at 76.16. November has stalled above the 20 day moving average this week as concerns over demand have helped to limit near term gains.

At the same time, stochastics and the RSI are bullish signaling that sideways to higher prices are possible near term. If November extends the rally off last week's low, the reaction high crossing at 78.86 is the next upside target. Closes below last Thursday's low crossing at 73.58 would renew the decline off this month's low.

First resistance is Monday's high crossing at 77.17
Second resistance is the reaction high crossing at 78.86

Crude oil pivot point for Wednesday morning 76.28

First support is last Thursday's low crossing at 73.58
Second support is the reaction low crossing at 73.08

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Crude Oil Rises After an Industry Report Shows Decline in U.S. Stockpiles

Crude oil advanced for the fifth time in six days in New York as an increase in Chinese manufacturing and a decline in U.S. supply bolstered speculation fuel demand in the world’s two biggest energy consumers will rise. Futures retraced yesterday’s 0.4 percent drop after a purchasing managers’ index showed manufacturing in China, the fastest growing major economy, accelerated for a second month. An Energy Department report today will probably show crude inventories in the U.S. fell last week, according to a Bloomberg News survey of analysts.

“There is still reasonable demand out there, and perhaps the sentiment toward economic optimism is still quite positive,” said Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney. Crude for November delivery rose as much as 44 cents, or 0.6 percent, to $76.62 a barrel in electronic trading on the New York Mercantile Exchange. It was at $76.45 at 1:37 p.m. Singapore time. Yesterday, the contract decreased 34 cents to settle at $76.18, snapping a four day rally.

Futures are down 3.5 percent this year. For September, the contract has climbed 6.3 percent and is poised for a 1.1 percent gain for the third quarter. An index of China’s manufacturing released today by HSBC Holdings Plc and Markit Economics rose to 52.9, the highest in five months, from 51.9 in August. The data are seasonally adjusted and readings above 50 indicate an expansion. China overtook the U.S. as the world’s largest energy user last year.....Read the entire article.



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Crude Oil's Time of the Year

The Fast Money guys and gal discuss the nature of the energy trade in October. Is it time for crude oil to rally?



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Stock Market and Commodities Commentary For Tuesday Evening Sept. 28th

The U.S. stock indexes closed firmer today despite a weak consumer confidence index reading that sunk the U.S. dollar. The indexes this week have hit fresh multi month highs. Bulls still have upside near term technical momentum as the stock market continues to "climb a wall of worry." We are half way through the historically bearish period from September to October, and the stock indexes have so far performed very well. It is my bias that if this autumn were to see serious market turbulence, it would likely have occurred during September.

Crude oil closed down $0.41 at $76.11 a barrel today. Prices closed near mid-range again today. Bulls and bears are on a level near term technical playing field. The next near term upside price objective for the bulls is producing a close above solid technical resistance at the September high of $78.86 a barrel.

Natural gas closed up 4.5 cents at $3.961 today. Prices closed near mid range again today and saw tepid short covering in a bear market. The bears still have the solid overall near term technical advantage. Prices have seen a bearish downside "breakout" from a sideways trading range at lower price levels.

Gold futures closed up $9.80 at $1,308.40 today. Prices today closed near the session high, scored another fresh record high and scored a big and bullish "outside day" up on the daily bar chart, whereby the high is higher and low is lower than the previous day's trading range, with a higher close. A weaker U.S. dollar and safe haven buying interest following some dour U.S. economic data today boosted gold. Gold bulls have the solid overall near term technical advantage and gained more power today.

The U.S. dollar index closed down 33 points at 79.22 today. Prices closed nearer the session low today and hit another fresh eight month low. Prices also scored a bearish "outside day" down on the daily bar chart. Bears have the solid overall near term technical advantage.


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A Breakthrough Invention in the Oil and Gas Market?

From Keith Schaefer at "Oil and Gas Investments Bulletin"....

An oil and gas entrepreneur in the US has devised an inexpensive way to capture oil and natural gas vapors around a well site, and sell them to make money. These vapors are often flared (burned), or vented into the atmosphere, and trust me, if people really knew how much oil and gas was flared around the world every day, even in first world countries, the media outcry would make the "water fracking" issue look like a kindergarten party. In fact satellite images show intense flaring occurring, principally in third world countries. Shell has just committed $2 billion to reduce flaring from its operations in Nigeria.


“Air pollution requirements related to oil and gas production from the states are becoming increasingly restrictive,” says co-inventor Dr. Paul Trost. And Trost's solution can be profitable. He adds that a study near Denver in the hydrocarbon rich Denver Basin containing almost 8000 oil and gas wells showed the “fugitive” hydrocarbons, gases emanating from production tanks can be captured and sold at a profit rather than burned in a flare. Just like water evaporates in a dish, oil and gas evaporates from the production tank at a well site, and escapes into the atmosphere or alternately is burned (flared).

The problem becomes bigger when a combination of gas and oil are produced with the gas being injected into a pipeline having pressure. The oil then is also pressurized and the pressurized gases (like gas in a pop can) then “flash” or boil off like a shaken beer can. In certain areas these gases are captured and directed to a flare for burning rather than being allowed to vent to the atmosphere.

Trost’s invention, called the V3RU (Variable Volume Vapor Recovery Unit), is different than other vapor recovery systems in that it uses a flexible accumulator (bag) to capture the vapors. “It swells up like it is taking a deep breath,” says Trost. “The bag thus captures both the flash gas and also any contained liquids. We exhale it slowly into compressor for injection and sale to a pipeline. It’s a variable volume bag and it’s safety rated. The alternative energy industry already uses it around breweries located in or adjacent to cities.” Without a bag, Trost says oxygen can get at the vapour and then it won’t meet pipeline specifications. The gas is then useless and must be flared. Using a bag allows some back pressure to be used, so it won’t let air in, and the gas retains its purity and suitability for pipeline sale.

Trost says the payout for the V3RU increases as the oil content of the natural gas increases, and also as the oil gets lighter (has a higher API rating) and contains more condensate. Typically the V3RU will range in cost from $8,000-$30,000. He gives a real life example of a gas/condensate well in Colorado that was producing about 30 BOPD and 400 mcfd, but high pipeline pressures were causing a large amount of “flash” gas, containing both recoverable oil and gas, was being lost. Application of the V3RU will allow the operator was able to capture an additional 8-10 boe/d, resulting in roughly a 2 year payout.

The product has been used almost exclusively in the Denver Basin, Trost says, but it is now starting to be used in other areas. Trost is a board member of Nextraction Energy (NEX-TSXv), which will be using the V3RU vapor recovery system to meet air quality regulations at Nextraction’s newly discovered gas-condensate well located at the Pinedale Anticline play in Wyoming.

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