CNBC's Sharon Epperson discusses the day's activity in the commodities markets, and looks ahead to where oil and gold are likely headed tomorrow.
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Monday, October 25, 2010
Stock Market and Commodities Commentary For Monday Evening Oct. 25th
Crude oil closed higher on Monday as it consolidates some of the decline off this month's high. The mid range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term. Closes below the reaction low crossing at 79.90 are needed to confirm that a short term top has been posted. Closes above the reaction high crossing at 84.80 are needed to confirm that a low has been posted. First resistance is last week's high crossing at 84.80. Second resistance is this month's high crossing at 85.08. First support last week's low crossing at 79.90. Second support is the August-September uptrend line crossing near 78.10.
Natural gas closed shortly higher on Monday due to short covering as it consolidated some of this year's decline. Stochastics and the RSI are oversold, and are turning neutral to bullish hinting that a low might be in or is near. Closes above the 20 day moving average crossing at 3.983 are needed to confirm that a short term low has been posted. If December extends this year's decline, weekly support crossing at 3.390 is the next downside target. First resistance is the 10 day moving average crossing at 3.877. Second resistance is the 20 day moving average crossing at 3.983. First support is today's low crossing at 3.500. Second support is weekly support crossing at 3.390.
Gold closed higher due to short covering on Monday as it consolidates some of this month's decline. The mid range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI remain bearish signaling that sideways to lower prices is possible near term. If December extends this month's decline, the 25% retracement level of this year's rally crossing at 1303.50 is the next downside target. Closes above the 10 day moving average crossing at 1351.00 would confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 1351.00. Second resistance is this month's high crossing at 1388.10. First support is last Friday's low crossing at 1315.60. Second support is the 25% retracement level of this year's rally crossing at 1303.50.
The U.S. Dollar closed lower on Monday and the mid range close sets the stage for a steady opening on Tuesday. Stochastics and the RSI are bullish hinting that a short term low might be in or is near. Closes above the reaction high crossing at 78.61 are needed to confirm that a short term low has been posted. If December extends the decline off August's high, the November 2009 low on the weekly continuation chart crossing at 74.21 is the next downside target. First resistance is the 20 day moving average crossing at 77.85. Second resistance is the reaction high crossing at 78.61. First support is last Friday's low crossing at 75.85. Second support is the November 2009 low on the weekly continuation chart crossing at 74.21.
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UL: The End of Oil's Golden Age
Also, approximately 15% of oil is used to make asphalt, plastics and a wide variety of critical chemical products. Therefore, crude oil plays a key role in the modern globalized world economy. It has truly enabled a golden age for those that can afford to leverage it.
Unfortunately, oil is a finite resource and some day we will run out of it if we continue consuming it like we do. Long before this happens we will have serious problems, as soon as demand exceeds the supply. This is the essence of “peak oil” concept. International Energy Agency (IEA) estimated in their 2008 World Energy Outlook that oil production should not peak before 2030 if 64 million barrels per day (mb/d) of additional capacity is taken into use between 2007 and 2030.
In theory this is possible, but in practice there is a very real risk of under investment since the required new capacity is equivalent to six times the current production of Saudi Arabia. Therefore, the report concludes that an oil supply crunch can happen as early as 2015.
It is immensely hard to estimate the maximum rate at which the oil can be extracted from all different sources, both conventional and unconventional. Therefore, it is also hard to estimate when oil production will peak. What seems fairly certain is that it will do so within the next 30 years, and I personally believe it will happen within the next 10 years......Read the entire article.
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Renewed USD Selling Boosts Commodities
There are few catalysts stopping the market from selling USD even after the G-20 meeting. While member countries agreed to 'refrain from competitive devaluation of currencies' and to move towards 'more market determined exchange rate systems that reflect underlying economic fundamentals', there's no proposal on how to reduce international trade imbalance between countries. It's only stated in the communiqué that 'persistently large imbalances, assessed against indicative guidelines to be agreed, would warrant an assessment of their nature and the root causes of impediments to adjustment as part of the Mutual Assessment Process'.
The US has also made no commitment to refrain from further quantitative easing in the fact of criticisms by other member countries. German Economy Minister Rainer Bruederle said 'it's the wrong way to try to prevent or solve problems by adding more liquidity…Excessive, permanent money creation in my opinion is an indirect manipulation of an exchange rate'. Canadian Finance Minister Jim Flaherty also agreed with the notion that 'aggressive quantitative easing in the US would create devaluation pressure on the U.S. currency'......Read the entire article.
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Phil Flynn: Currency Détente
The perception by the market place that the G20 will do nothing to stop a drubbing of the dollar is sending the yen soaring to a 15 year high and the oil and other commodities soaring in early trade. In fact you might wonder why the oil market is not even stronger than it is considering the fact that not only is the dollar giving us support, but also the impact on the strikes in France that are going to take a toll on US supply. The AP reports that, “French Finance Minister Christine Lagarde says the country's massive strikes are costing the economy up to euro400 million ($562 million) each day.
Protests over President Nicolas Sarkozy's plan to raise the retirement age from 60 to 62 have left France struggling with fuel shortages, travel chaos and uncollected garbage. Lagarde told Europe-1 radio Monday that the daily economic cost is between euro 200 million and euro 400 million. The minister also says the strikes are damaging France's image abroad......Read the entire article.
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Crude Oil Technical Outlook For Monday Morning Oct. 25th
If December extends last week's decline, trendline support drawn off the August-September lows crossing near 78.13 is the next downside target. Closes above the reaction high crossing at 84.80 are needed to confirm that a short term low has been posted.
First resistance is the overnight high crossing at 82.99
Second resistance is the reaction high crossing at 84.80
Crude oil pivot point for Monday morning is 81.39
First support is last Wednesday's low crossing at 79.90
Second support is the uptrend line drawn off the August-September lows crossing near 78.13
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Sunday, October 24, 2010
SPX, U.S. Dollar, Crude Oil and Gold Analysis
Last week was volatile thanks to China raising their interest rates a quarter basis point. This rate hike caused the Dollar to spike in value which in turn forced equities and metals to sell off sharply. This one day event caused equities to break below a short term support level causing a large number of protective stops to be triggered. This added more selling pressure causing the market to be down nearly 2.5% at one point but a late day bounce recouped a good chunk of the drop.
Wednesday & Thursday the market had a nice rally making back all of losses and then some. But Thursday afternoon we saw the market slip below a key short term support level and triggered another wave of stops. The market continues to resilience because it recovered into the close saving the day.
After Thursday’s end of day rally, we had expected a typical light volume session which typically chops around in a sideways or slow grind higher.
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Wednesday & Thursday the market had a nice rally making back all of losses and then some. But Thursday afternoon we saw the market slip below a key short term support level and triggered another wave of stops. The market continues to resilience because it recovered into the close saving the day.
After Thursday’s end of day rally, we had expected a typical light volume session which typically chops around in a sideways or slow grind higher.
SPY – SP500 ETF 10 Minute Intraday Chart
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Crude Oil Rises a Second Day as Faster U.S. Economic Growth May Boost Fuel Use
The December contract advanced as much as 47 cents, or 0.6 percent, to $82.16 a barrel in electronic trading on the New York Mercantile Exchange, and was at $82.10 at 9:15 a.m. Sydney time. It rose $1.13 to $81.69 on Oct. 22. Prices gained 0.5 percent last week and are up 3.4 percent this year. Tropical Storm Richard strengthened to a hurricane, with maximum sustained winds of 90 miles per hour, as it moves to the west-northwest at 13 mph toward the coast of Belize, the U.S. National Hurricane Center said in an advisory yesterday.
Brent crude for December settlement added 30 cents, or 0.4 percent, to $83.26 a barrel on the London based ICE Futures Europe exchange. The contract gained $1.13, or 1.4 percent, to $82.96 on Oct. 22.
Courtesy of Bloomberg News
Reporter Ben Sharples can be reached at bsharples@bloomberg.net
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Saturday, October 23, 2010
Getting Started in Commodities
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Kent Moors: How to Play an Explosive Oil Field Services Sector
The Best OFS Indicator: The Number of Drilling Rigs in Use
During the depths of the financial crisis, drilling experienced a collapse in rig usage, with the decline in both demand and pricing. At its low point, we had barely one third of the rigs being used in any capacity, many of them in injection or workover usages, that is, not drilling new wells for new volume. That is now in full reversal. As of Monday (October 18th), the overall total of drilling rigs in use stands near five year highs.
Even more significant are the field units involved in horizontal drilling. These operations are essential to shale gas and oil development, as well as a range of applications where lateral, rather than vertical, drilling angles are warranted, either for enhanced production or environmental reasons. I’ll give you one of the main indicators I always apply in looking at the overall rig figures. Since November 2005 (when I first started calculating these figures, roughly with the beginning of major shale gas plays), having at least 500 rigs in North American field development applied only to horizontal drilling and hydrofracking operations is taken to mean a significant rise in the OFS market.
As that figure moves beyond 500, we tend to experience an OFS sector heating up, with expanding prices and equipment shortages. That puts OFS providers and their field availability at a premium, thereby increasing service charges… and profitability. A total above 600 indicates an accelerating inflationary pressure in those charges. And as of Monday, the horizontal rig usage stood at 641. What is occurring in rigs is also taking place up and down the OFS provision chain, from seismic and geological survey services to well completions and logging (the generation of readings to determine a range of wellhead and pipe casing conditions). And the results are intensifying.
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Oil N'Gold: Crude Oil Weekly Technical Outlook For Saturday Oct. 23rd
In the bigger picture, after all, we're still favoring the case that medium term rally from 33.2 is already completed at 87.15. Recovery from 64.23 is treated as a correction and should be near to completion, if not finished. Even in case of another rise, 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). However, decisive break of 87.15 will put focus on long term fibo level at 50% retracement of 147.27 to 33.2 at 90.24.
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. Price actions from 147.27 are treated as consolidation in the larger up trend and with 90.24 fibo resistance intact, a test of 33.2 eventually is in favor. Though, decisive break of 90.24 will argue that crude oil will bring stronger rally to above 100 psychological level as a relatively powerful second wave of the consolidation continues.
Nymex Crude Oil Continuous Contract 4 Hour, Daily, Weekly and Monthly Charts
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Friday, October 22, 2010
Lind-Waldock: Crude Oil Poised to Reach $90 a Barrel
“Since then, the market has made higher highs and higher lows,” Robben said. A line drawn from the Sept. 23 low to the Oct. 20 low of $79.90 projects to $90 by the middle of December, he said. The initial target for the rising price is $86.52, the high on May 13, which may be reached by the middle of November, Robben said.
“If we close below $79.90, the uptrend is over and we’re back in a trading range of $75 to $85,” he said. Crude oil for December delivery settled at $80.56 a barrel yesterday on the New York Mercantile Exchange.
Bloomberg reporter Barbara Powell can be reached at Bpowell4@bloomberg.net.
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China's Oil Demand Rises on Year On Year Basis
China's apparent oil demand in September rose 5.1% year on year to 35.53 million metric tons (mt) or an average of 8.68 million b/d, according to Platts' analysis of data from the People's Republic of China. However, September demand is almost unchanged from August's 35.54-million-mt level. Meanwhile, China's apparent oil demand in the first nine months of the year totaled 317.7 million mt or an average of 8.52 million b/d, up 10.25% from the same period of 2009, according to Platts' data.
Chinese refiners processed a total 34.91 million mt or an average 8.53 million b/d of crude in September. This is up 6.35% from a year ago, but just 0.52% higher than August, according to data released by the country's National Bureau of Statistics on Oct. 21. The refiners' collective crude throughput from January to September was 310.74 million mt, 13.48% higher from a year ago. Chinese crude imports in September hit a new historic high of 23.29 million mt, or around 5.7 million b/d.
"The crude available to China in September, including domestic production and net imports, was 40.09 million mt, but the throughput was only 34.91 million mt. So a little over 5 million mt of crude presumably went into storage, the highest in a month so far this year," said Vandana Hari, Asia editorial director at Platts. "At the same time, China's monthly refined product imports continued to come off June's high of 3.64 million mt, while the country stepped up product exports last month. The flattening of implied oil demand in September could be a precursor to an easing of the country's runaway oil demand growth rate for the remainder of 2010."
Courtesy of Rigzone.Com
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Chinese refiners processed a total 34.91 million mt or an average 8.53 million b/d of crude in September. This is up 6.35% from a year ago, but just 0.52% higher than August, according to data released by the country's National Bureau of Statistics on Oct. 21. The refiners' collective crude throughput from January to September was 310.74 million mt, 13.48% higher from a year ago. Chinese crude imports in September hit a new historic high of 23.29 million mt, or around 5.7 million b/d.
"The crude available to China in September, including domestic production and net imports, was 40.09 million mt, but the throughput was only 34.91 million mt. So a little over 5 million mt of crude presumably went into storage, the highest in a month so far this year," said Vandana Hari, Asia editorial director at Platts. "At the same time, China's monthly refined product imports continued to come off June's high of 3.64 million mt, while the country stepped up product exports last month. The flattening of implied oil demand in September could be a precursor to an easing of the country's runaway oil demand growth rate for the remainder of 2010."
Courtesy of Rigzone.Com
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Phil Flynn: Project China
China GDP number just barely met or exceeded market expectations and for a market that lives or dies on China surprising us, it just was not enough. It bored us. At the same time in the aftermath of the Chinese’s government increasing interest rates the higher than expected 3.6 percent rise in the Chinese Consumer Price index should increase the odds that we will see more moves by the Chinese to try to reign in what they are starting to see as an inflation problem.
Oil bulls also had to be dismayed by the fact that despite the fact that the Chinese imported a record amount of crude last month, it seems it went into storage as opposed to the refinery. Data from the China Mainland Marketing Research Company showed that China processed 8.5 million barrels of oil a day which according to Bloomberg News was the smallest increase since March of 2009. A sign that demand may already be......Read the entire article.
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Zacks: Haliburton a Near Term Buy?
Earnings Review
Halliburton's better than anticipated third quarter 2010 results were helped by the strength in the all important North American onshore activity levels (to which the company is heavily exposed through its market share leading pressure pumping business). Earnings per share, excluding special items, came in at 58 cents, beating the Zacks Consensus Estimate of 56 cents and were comfortably ahead of the year ago adjusted profit of 31 cents.
Revenues of $4.7 billion, 30% above the third quarter of 2009, also surpassed the Zacks Consensus Estimate of $4.6 billion, as sales increased across the company’s business units. During the quarter, North America accounted for approximately 51% of Halliburton’s total revenues and 65% of its operating income.
Agreement of Estimate Revisions
There is a strong positive agreement among the analysts regarding Halliburton’s outlook. In particular, we see a notable number of estimate revisions over the past 7 days, indicating that the revisions were in response to the company’s third quarter earnings release. Out of 33 analysts covering the stock, 23 have revised their estimates for 2010 upward, while 5 have gone in the opposite direction. Looking forward to 2011, the trend is more or less similar. Out of 33 analysts, 22 hiked their estimates compared to just one negative revision. Estimates are up for the December quarter of 2010 as well. For the current quarter, 21 of the 29 analysts have increased their estimates over the last 7 days, against 5 downward revisions.
As a result of the analysts revising estimates over the past 7 days, the Zacks Consensus Estimates for fiscal 2010 and 2011 have gone up 5 cents (from $1.94 to $1.99) and 13 cents (from $2.49 to $2.62), respectively. Meanwhile, the estimate for the December 2010 quarter is up by 3 cents. The increases are based on the expectations of bullish near-term U.S. land drilling trends, where activity is being driven by oil and liquids-rich plays. This will make the reduction in gas activity less meaningful. Halliburton will continue to be a beneficiary of the bullish rig count fundamentals in the U.S., driven by horizontal drilling in the service intensive plays.
Our Recommendation
Halliburton currently has a Zacks #2 Rank (short-term 'Buy' rating). In the near term, the company is likely to benefit from bullish U.S. land drilling trends, where activity is tracking above expectations. However, new environmental regulations for hydraulic fracturing in the shale plays, the intensely competitive nature of the market, and depressed natural gas prices will continue to overhang the stock during the longer-term, accounting for our Neutral recommendation.
Courtesy of Zack.com
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Crude Oil Bears Appear to Have a Clear Near Term Advantage, Here's Fridays Numbers
If December extends this week's decline, trendline support drawn off the August-September lows crossing near 78.10 is the next downside target. Closes above the reaction high crossing at 84.80 are needed to confirm that a short term low has been posted.
First resistance is the 20 day moving average crossing at 81.78
Second resistance is the 10 day moving average crossing at 82.25
Crude oil pivot point for Friday morning is 81.12
First support is Wednesday's low crossing at 79.90
Second support is the uptrend line drawn off the August-September lows crossing near 78.10
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Thursday, October 21, 2010
Bloomberg: Crude Oil Rises as Reports Show Improved U.S. Economic Outlook
“For the short term, the positive economic indicators should support the prices,” said Tetsu Emori, a commodity fund manager at Astmax Ltd. in Tokyo. “Fundamentals aren’t what people are looking at for the market but currencies and financial market conditions.” The December contract added as much as 60 cents, or 0.7 percent, to $81.16 a barrel in electronic trading on the New York Mercantile Exchange, and was at $81.05 at 11:55 a.m. Singapore time. Yesterday it lost $1.98 to $80.56. The contract has fallen 1 percent this week.
Oil also rose as Labor Department figures yesterday showed U.S. initial jobless claims dropped by 23,000 to 452,000 in the week ended Oct. 15. Chinese crude production gained 9 percent in September, the National Bureau of Statistics said Oct. 21. Oil refining reached 8.5 million barrels a day last month, China Mainland Marketing Research Co. said......Read the entire article.
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Commodity Corner: Crude Falls as Dollar Rebounds
The second largest oil consumer after the U.S., China, is estimated to account for approximately 40 percent of an expected 2.1 million barrel per day increase in global oil demand this year and approximately one third of a 1.2 million-b/d increase next year, according to the International Energy Agency. The dollar rose 0.3 percent against the euro Thursday after falling earlier as much as 0.6 percent. Light, sweet crude futures traded between $80.09 and $82.70.
Likewise, natural gas futures plummeted to new 13-month lows Thursday. Henry Hub natural gas decreased 4.8 percent and settled at $3.37 per thousand cubic feet. The U.S. Energy Information Administration (EIA) reported that natural gas inventories grew by 93 billion cubic feet last week, marking the sixth consecutive above average weekly build. According to the inventory report, the U.S. had 3.68 trillion cubic feet of natural gas in underground storage last week.
The National Hurricane Center observed a tropical storm headed toward Mexico's Yucatan Peninsula Thursday. The system, Tropical Storm Richard, formed in the northwestern Caribbean Sea. Meteorologists predict that the storm may continue into the Gulf of Mexico, but major impact should be prevented by the high wind shear. The intraday range for natural gas was $3.35 to $3.54 Thursday. November delivery gasoline prices settled at the lowest point since Sept. 29 at $2.04 a gallon, after peaking at $2.08 and bottoming out at $2.03.
Courtesy of Rigzone.Com
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The Dollar-Crude Oil Trade
Dan Dicker, an independent oil trader, shares his dollar-oil trade with CNBC.
Why Diversification Doesn't Work
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Why Diversification Doesn't Work
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Markets Close Mixed as Commodity Bulls Fight The Stronger Dollar
Crude oil closed down $1.91 at $80.63 a barrel today. Prices closed nearer the session low today. A rebounding U.S. dollar pressed the crude market lower today. Trading has turned very choppy. Bulls and bears are on a level near term technical playing field.
Natural gas closed down 13.3 cents at $3.76 today. Prices closed nearer the session low today and prices hit another fresh contract low. The bears have the solid overall near term technical advantage.
Gold futures closed down $19.70 at $1,324.50 today. Prices closed near the session low today and hit a fresh two week low. Profit taking, a firming U.S. dollar index and lower crude oil prices combined to pressure gold today. Prices also scored a bearish "outside day" down on the daily bar chart, whereby the high was higher and low was lower than the previous session's trading range, with a lower close. Some near term technical damage was inflicted today as a 2 1/2 month old uptrend on the daily bar chart was at least temporarily negated today to begin to suggest that a near term market top is in place. Bulls do still have the overall near term and longer term technical advantage, but have faded this week and need to show fresh power soon.
The U.S. dollar index closed up 27 points at 77.69 today. Prices closed near the session high today and saw short covering in a bear market. Dollar index bears still have the overall near term technical advantage.
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