Crude Oil Rallies Above 83 Despite Inventory Gains

Total crude oil and petroleum products stocks declined for the 4th week, by -0.26 mmb to 1106.15 mmb in the week ended November 19. Crude oil inventory unexpectedly gained +1.03 mmb, compared with consensus of a -1.03 mmb drop, to 358.63 mmb with stock rising in 3 out 5 PADDs. Cushing stock also rose +0.56 mmb to 33.63 mmb. Utilization rate climbed +1.5% to 85.5%.

Gasoline inventory increased +1.91 mmb to 209.59 mmb while that for distillate dipped -0.54 mmb to 158.25 mmb. Gasoline demand slipped -1.37% to 8.83M bpd. Imports and production rose +39.50% and +0.12% respectively. Distillate demand claimed +0.63% to 3.80M bpd. Both imports and production soared, by 49.43% and +1.46% respectively.

WTI crude oil jumped to as high as 83.05 after the report, despite stock builds in crude oil and gasoline. A Strong rebound in the stock markets was probably the main reason driving oil prices higher.

Here is a Comparison Between API and EIA Reports


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What's Surprising Me Most about Canadian Natural Gas

From guest analyst Keith Schaefer......

Western Canadian gas exports to the United States could be completely displaced into Northern California by....

1. Abundant, low cost US natural gas production,
2. And by several new gas pipelines in the US,

Says a new market study by Bentek, a US energy analysis company. Overall, Canadian gas exports to the US will drop 2 bcf/d over the next few years, almost 30%, and this impending loss of the northern California market builds upon the loss that western Canadian gas has in lower exports to the US northeast. Increased Canadian demand and declining Canadian supply will pick up some of the slack, but it won’t be enough to offset a significant loss of exports to the US market in the near term, they add.

Bentek’s report, titled “The Big Squeeze”, is a report that also outlines how fast growing production from the Marcellus shale in Pennsylvania is displacing Canadian gas to the lucrative Northeast US market, and how new pipeline capacity carrying low cost gas out of the Rocky Mountains is now set to displace much of Canadian gas to the US Midwest and lucrative California markets.

“What we outlined in our study was complete displacement of Canadian gas into Northern California by the summer of 2014,” says Jack Weixel, Director of Energy Analysis for Bentek.
Last summer I wrote about how the new $6 billion Rockies Express pipeline, or REX, going from Colorado to Ohio, was displacing western Canadian gas production by almost 10%. Lately, US natural gas production from the Marcellus shale has also been displacing Canadian gas to the US Northeast. Canadian suppliers have been able to send more natural gas into the Midwest and Western US to help make up for that drop.

But Bentek says even that market is at risk, and Canadians could see this market get curtailed within the next two weeks, in early December 2010. That’s when low cost Rockies gas supply will start flowing east on the newly installedBison Pipeline. This will give Rockies producers an additional 0.5 Bcf/d (billion cubic feet per day) of capacity out of the Powder River basin in Wyoming. The Bison connects into the Northern Border Pipeline, which moves mostly western Canadian supply.

Weixel expects the Bison Pipeline to create stiff competition for Canadian gas. He says Canadian gas has to get cheaper to stay competitive. “They (Canadian gas producers) need to drop 14 cents (an mcf). Let’s say Rockies gas is $3.50/mcf - that means that AECO (the Canadian natural gas benchmark price out of Edmonton) needs to be priced $3.36 to be competitive in northern California,” says Weixel, adding that the breakeven price for certain Rockies gas producers in the Pinedale and Jonah tight sands plays is “well below $3 per mcf.”

Weixel expects net Canadian exports to drop 2 bcf/d through 2015, out of a total of 6.9 bcf/d now. But it’s not all gloomy for producers – and their shareholde“At the same time exports are declining, you’ve got Canadian demand growing, primarily from oilsands in the west and coal retirements in the east,” he says. “You’ve also got production slipping from conventional gas plays in Alberta. So there is a tightening supply demand balance.

“Traditionally that would lend itself to gas prices getting stronger. But we believe that due to the drop in exports, that there will be just as much gas on hand in Canada as there is now. So if production drops 1.5 bcf/d but exports drop 2 bcf/d, they’re up half a “b” a day.
Canadian gas production is actually going up because of the unconventional plays in BC (read: MONTNEY), but Weixel says the gas rig count in Alberta dropped off a cliff this September, and is about half the number it was last year and about one quarter what it was in 2008.

What’s surprising to me is how little both the industry and investors appear to be concerned about this issue. The Calgary Herald ran a small story on this, and The Daily Oil Bulletin, which is ready by the industry only, ran a story (masthead, or lead story). There are thousands of high paying jobs at stake – mostly in Alberta but also in northern B.C.


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Bloomberg: Contango on Mideast Oil Disappears on China Diesel Squeeze

The 1 month old contango in Dubai oil, the benchmark grade of crude for Asia, has disappeared as a shortage of diesel in China puts a premium on the quickest deliveries of fuel. The December contract was 15 cents a barrel more expensive than January’s today, reversing a discount that’s been in place since July 2009, according to data from PVM Oil Associates, a London based broker.

A shortage of diesel in China is pushing up the premium for the fastest deliveries of oil as the nation curbs power use under a plan by Premier Wen Jiabao to cut electricity consumption per unit of gross domestic product by 20 percent in the five years through 2010. Stockpiles in the country, the world’s biggest energy user, fell for a seventh month in October, according to data from China Oil, Gas & Petrochemicals, a publication of the state owned Xinhua News Agency.

“China’s got to be short” of crude oil, said Alex Yap, an analyst at FACTS Global Energy in Singapore. “If they want to do any restocking from November to December, they’ll have to be importing a lot for the next couple of months.”

Oil imports dropped 30 percent to a 17 month low of 16.4 million metric tons in October, or about 3.9 million barrels a day, the General Administration of Customs said Nov. 22. Diesel inventories declined 11 percent to about 6.2 million tons in October, data from Xinhua News showed on Nov. 22. They were 11.5 million tons in February......Read the entire article.


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6 Natural Gas Stocks for 2011

Dan Dicker argues why he thinks 2011 will be the year for natural gas and reveals his top stock picks.



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Toby Shute: 3 Oil Deals Shaking the Market

This week, I've spotted at least three billion dollar oil deals that should be of interest to investors (all this as of Tuesday!). Combined with other activity in recent weeks, this suggests that there's plenty more M&A mayhem to come as we approach the end of the year.

A big splash in the Gulf
First off, Energy XXI (Nasdaq: EXXI) agreed to pick up a bunch of ExxonMobil's (XOM) shallow water Gulf of Mexico properties for $1 billion. This follows similar moves by Apache (APA), which grabbed Devon Energy's (DVN) shallow Gulf assets for an identical sum, and McMoRan Exploration (NYSE: MMR), which picked up the pieces from Gulf dropout Plains Exploration & Production (PXP).

Energy XXI is picking up 66 million barrels of oil equivalent (Boe) of proved and probable reserves, and 20,000 Boe per day of production. The cash flow multiple paid is 3.2. Apache got more reserves with its purchase (83 million boe), slightly less production (19,000 boe/d), and paid 3.7 times estimated cash flow. In both cases, oil and natural gas production is split roughly 50/50, so I assume the lower Energy XXI cash flow multiple is largely a reflection of higher oil prices. Any way you slice it, the purchase price looks reasonable.

With this purchase, Energy XXI becomes the third largest oil producer on the Gulf of Mexico shelf, leapfrogging W&T Offshore (WTI) in terms of reserves, and both McMoRan and Stone Energy (SGY) in terms of production. The assets acquired have the potential to deliver around 720 million Boe at a development cost of around $15 per barrel.

That would be a really compelling figure, if a large component of that total resource potential was oil. The potential oil mix, surprisingly, is only around 10%, however, alongside 3.9 trillion cubic feet of gas. So the big upside appears to be in deep and ultradeep gas prospects, such as the ones Energy XXI is exploring in partnership with McMoRan elsewhere on the Gulf of Mexico shelf.

Incidentally, Exxon walked away from one of these ultradeep drilling projects a few years ago. This week's sale confirms that the company lacks an appetite for this activity. Given the likely difficulties in securing future permits to drill these extremely high-pressure wells, I can't really blame it. I'm a decided fan of wildcat drilling in the Gulf, but my preference is for companies sizing their bets more conservatively.

Yet another Bakken buy
Last week we saw Williams (WMB) make a $925 million purchase in prime Bakken territory up in North Dakota. This week, Hess (HES) edges it out with a $1.05 billion buy of privately held TRZ Energy. This follows closely on the heels of the company's acquisition of American Oil & Gas (AEZ) earlier this year.

The 167,000 acres acquired in this latest deal bring 4,400 barrels of daily production to the table. That's a pretty massive $238,600 per flowing barrel purchase price. At under $6,300 per acre, though, this purchase comes at a discount to those executed by Williams and Enerplus Resources Fund (NYSE: ERF). From what I can piece together, TRZ is active in Dunn and Williams County. You may recall that Dunn County is the location of Kodiak Oil & Gas' (AMEX: KOG) core development area. This should be very prospective acreage, suggesting that Hess may have gotten a great deal here.

Another Asian oil sands suitor
Over the past year or two, one of the most active players in the Canadian oil sands has been China. PetroChina (PTR) took a big stake in a pair of Athabasca Oil Sands' projects last September. More recently, Sinopec (SHI) snapped up ConocoPhillips' (COP) 9% stake in Syncrude, and a Chinese sovereign wealth fund snapped up a stake in some Penn West Energy Trust (NYSE: PWE) properties.

Showing that China isn't the only one salivating over the security of long term oil sands supply, Thai energy company PTTEP has also stepped forward. The company is picking up 40% of Statoil's (STO) Kai Kos Dehseh oil sands project for $2.3 billion. The entry looks low-risk, as first production is slated for early 2011.

Thanks to heady oil prices, the oil sands have made a roaring comeback since the dark days of 2008. As long as you believe that the world economy will continue to support $70 plus oil prices, the oil sands are indeed an interesting place for your money. Cenovus Energy (CVE) continues to be my favorite operator in that realm.


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Phil Flynn: Happy Thanksgiving!

Well I guess we have one thing to be thankful for this Thanksgiving, oil prices are coming back down. All right it’s something and it was hard to find that silver lining especially after the week that we have had. It seems the world has gone crazy and there are new risks around every corner and these risks have conspired to bring oil prices back down.

Now can you enjoy your turkey? It was only weeks ago that oil bulls were basking in the intoxication of the Fed’s Quantitative Easing the sequel. The oil market topped $88.00 a barrel, it was a suckers rally as the market felt confident that all was well as the Fed had the markets' back. What was there to worry about? Tell after the Fed minutes we find out there is plenty to be worried about. The Fed’s grim economic outlook and a sense that perhaps some members of the Fed are questioning fed policy, have helped reduce some oil trader’s optimism about QE2 inspired oil demand.

The Fed lowered its forecast for 2010 GDP down to 2.4 to 2.5% from their previous estimate of 3 to 3.5%. For 2011 they expect GDP between 3% and 3.6%, down from 3.5% to 4.2% previously. As far as 2012 when the market expects rates will finally increse GDP projection is little changed while the new 2013 projection is put at 3.5-to-4.6%. The Fed also downgraded expectations for the unemployment rate which were raised for 2011 to a rate, 8.9% to 9.1% is expected. In 2013, the jobless rate is still seen between 6.9% and 7.4%.

What’s even more of a concern is the members of the Fed may not be on board with all of the printing of money. The Fed Minutes said that participants......Read the entire article.


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Crude Oil Technical Outlook For Wednesday Morning Nov. 24th

Crude oil was higher due to short covering overnight as it consolidates above the 50% retracement level of the August-November rally crossing at 81.14. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term.

If January extends the aforementioned decline, the 62% retracement level of the August-November rally crossing at 79.24 is the next downside target. Closes above the 20 day moving average crossing at 84.41 would confirm that a short term low has been posted.

First resistance is the 10 day moving average crossing at 83.16
Second resistance is the 20 day moving average crossing at 84.41

Crude oil pivot point for Wednesday morning is 81.21

First support is Tuesday's low crossing at 80.28
Second support is the 62% retracement level of the August-November rally crossing at 78.56


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New Video - It's more important to the market than Ireland, Greece, Portugal, and Spain Combined

It's more important to the market than Ireland, Greece, Portugal, and Spain combined

The trials and tribulations of these four countries (that have run up huge deficits) have been well known for quite some time. What is more important in my opinion is not the size of the debt, which is staggering, but rather what is going on with market perception.

Market perception trumps everything else out there. Market perception trumps market fundamentals every time. Market perception is the one card that the government cannot control. It is the card that can potentially give the individual trader an edge.

So what is market perception? Well, have you ever noticed that when some big world event happens, or a new "hot" IPO hits the markets, traders expect that market to go in the talked about direction and typically it does. What doesn't get talked about is how the market then corrects itself and the technicals really come into play.

The only real way to avoid the trap is through the use of technical analysis, or in the case of MarketClub, our "Trade Triangle" technology. This technology doesn't read the newspapers, doesn't watch cable news, and is independent of everything else except the market itself.

What is the most important thing to most investors? I would have to say it is the bottom line. If you're not making money in the market, then you're doing something wrong. Maybe you're paying more attention to the talking heads on cable, or to the nightly news, but you're not really paying attention to market perception.

I was lucky enough when I began my career to learn about technical analysis very early on. I said to myself, when it can be this easy there must be something more that I'm missing. It was then that I made the mistake of looking at all these other so called tools like fundamentals, earnings reports, etc. You name it, I looked at it.

One day I finally got smart and realized that I had already found the "true gold" in trading by using technical analysis.

I was just watching some talking head author on TV and they were saying that technical analysis is so 1920's and old technology. Of course, the person who was saying that was looking to sell copies of their book.

I said to myself, boy oh boy, not to look at technical analysis, which is like the DNA of the market, is a huge mistake. I can see people going out and buying this author's book and being led down the wrong path. I will not name the book as readers of this gobbledygook are going to spin their wheels only to find that it really doesn't work.

Let's keep things simple. That is the secret to successful trading.

At MarketClub we tend to look at the market in a very simple fashion. Let me explain; the market can only do three things: it can go up, it can go down, and it can go sideways. In life there are very few things that you can simplify as easily as that.

So using MarketClub's "Trade Triangles" you are able to determine when the market is going up, in which case you want to be long, and when the market's going down, in which case we want to be short or out of the market.

Now of course we do filter the "Trade Triangles" of MarketClub to help avoid trading losses. With any kind of trading or investing program the risk of loss is always there. The key to success is how you manage those losses. Are the losses small enough as to not bite into your capital in a major way?

Again, when you're looking at market fundamentals or other ways to trade, they really don't tell you when to get out. Obvious examples of this would be the Enron scandal or the recent GM debacle that took unwary investors to the poor house.

But it's hard to fake a market saying everything is great, when the market is heading south. So what is an investor to think? I believe you have to trust your eyes and the direction of the market. After all, that's what makes up your bottom line.

In today's video we're going to be looking at one or two markets and how the "Trade Triangles" are positioned right now. We are not predicting what's going to happen in the future. We are simply going to look at the purity of the "Trade Triangles" and how they can help investors with the most important market element of all, market perception.

As always our videos are free to view and there are no registration requirements.

So watch and enjoy "It's more important to the market than Ireland, Greece, Portugal, and Spain Combined"

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Hess Extends Bakken Footprint with TRZ Energy Deal

Hess has agreed to acquire 167,000 net acres in the Bakken oil shale play in North Dakota from TRZ Energy for $1.05 billion in cash. The properties being acquired are located near Hess' existing acreage and have current net production of approximately 4,400 boe/d.

"This acquisition strengthens our leading land position in the Bakken, leverages our operating capabilities and infrastructure and will contribute to future reserve and production growth," said Greg Hill, President of Worldwide Exploration and Production at Hess. The transaction has an effective date of October 1, 2010 and is expected to close by December 28, 2010.

Posted courtesy of Rigzone.Com

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Commodity Corner: Crude Oil Falls on Europe, Korea Concerns

Crude dropped for the third day Tuesday amid a backdrop of lingering concerns about the European debt crises and the two Koreas' shelling exchange.

Light, sweet crude futures fell 49 cents, settling at $81.25 a barrel on the New York Mercantile Exchange. Oil tumbled 0.6 percent Tuesday, a day after Ireland sought a financial bailout from the European Union and International Monetary Fund. German Chancellor Angela Merkel's comments that the euro is in an "exceptionally serious" situation added to the European debt fears, sending the dollar up against the euro. A stronger dollar curbs commodities' appeal for buyers with foreign currencies.

Escalating tensions between North and South Korea also contributed to decreasing prices. North and South Korea's exchange of artillery fire early Tuesday drove investors to seek refuge from riskier assets, according to analysts. The intraday range for crude prices was $80.28 to $82.10 Tuesday.

Natural gas for December delivery fell by less than a penny Tuesday to settle at $4.26 per thousand cubic feet. The decline came as forecasts showed milder weather in the U.S. The National Weather Service now expects normal to above normal temperatures in the Northeast for the next six to 10 days. The December contract for natural gas expires Wednesday, along with the release of this week's inventory report. It will be released a day earlier due to the U.S. Thanksgiving holiday on Thursday. Henry Hub natural gas peaked at $4.29 and bottomed out at $4.115.

Front month December gasoline also settled lower, falling 1.77 cents to end Tuesday's trading session at $2.13 a gallon. RBOB gasoline fluctuated between $2.10 and $2.15 Tuesday.


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Sharon Epperson: Where is Crude Oil and Gold Headed on Wednesday

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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Another War and Then Another War and Then… What is This Groundhog Day?

If you haven’t heard the latest news about North Korea attacking and making aggressive moves towards Yeonpyeonga, a small South Korean island, you missed what moved the gold market today. South Korea scrambled fighter jets and returned artillery fire after North Korea provoked the peninsula’s most serious confrontation in decades.

What you probably did not know was the $20 move up in gold today was signaled the day before by our “Trade Triangles.” How was this possible? It has everything to do with some very cool technology developed by MarketClub.

Yesterday, MarketClub through its “Trade Triangle” technology flashed a buy signal in gold. This was 24 hours before today’s big up move! How could it be possible that a technology could know what was going to happen before it happens?

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North Korean Military Action Pressures U.S. Markets, Sends Gold and Dollar Sharply Higher

The S&P 500 index closed lower due to profit taking and a stronger U.S. Dollar led mostly by North Korean artillery fire, consolidating some of last week's short covering rally. The low range close sets the stage for a steady to lower opening on Wednesday. Stochastics and the RSI are neutral to bullish signaling that a short term low might be in or is near. Closes above Monday's high crossing at 1206.00 would temper the near term bearish outlook. If December renews the decline off last week's high, the 25% retracement level of the July-November rally crossing at 1169.37 is the next downside target. First resistance is Monday's high crossing at 1206.00. Second resistance is this month's high crossing at 1224.50. First support is last Tuesday's low crossing at 1175.20. Second support is the 25% retracement level of the July-November rally crossing at 1169.37.

Crude oil closed lower on Tuesday but remains above the 50% retracement level of the August-November rally crossing at 81.14. The mid range close sets the stage for a steady opening on Wednesday. Stochastics and the RSI remain neutral to bearish signaling that sideways to lower prices are possible near term. If January extends the decline off last week's high, the 62% retracement level of the August-November rally crossing at 79.24 is the next downside target. Closes above the 20 day moving average crossing at 84.47 are needed to confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 83.85 Second resistance is the 20 day moving average crossing at 84.47. First support is today's low crossing at 80.28. Second support is the 62% retracement level of the August-November rally crossing at 79.24.

Natural gas closed lower due to profit taking on Tuesday as it consolidates some of the rally off last week's low. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term. If December extends the rally off October's low, the 38% retracement level of the June-October decline crossing at 4.362 is the next upside target. Closes below the 20 day moving average crossing at 3.973 are needed to confirm that a short term top has been posted. First resistance is Monday's high crossing at 4.290. Second resistance is the 38% retracement level of the June-October decline crossing at 4.362. First support is the 10 day moving average crossing at 4.015. Second support is the 20 day moving average crossing at 3.973.

Gold closed higher on Tuesday and above the 10 day moving average crossing at 1365.10 signaling that a short term low has been posted. The high range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI are turning bullish signaling that sideways to higher prices are possible near term. If December extends the rally off last week's low, the reaction high crossing at 1388.10 is the next upside target. If December renews this month's decline, the reaction low crossing at 1315.60 is the next downside target. First resistance is today's high crossing at 1382.90. Second resistance is the reaction high crossing at 1388.10. First support is last Tuesday's low crossing at 1329.00. Second support is the reaction low crossing at 1315.60.

The U.S. Dollar closed sharply higher due to world economic concerns on Tuesday and at the same time renewing this month's rally. The high range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI are overbought, diverging but are turning neutral to bullish again signaling that sideways to higher prices are possible near term. If December extends this month's rally, the 38% retracement level of this year's decline crossing at 80.54 is the next upside target. Closes below the 20 day moving average crossing at 77.96 would confirm that a short term top has been posted. First resistance is today's high crossing at 79.83. Second resistance is the 38% retracement level of this year's decline crossing at 80.54. First support is the 20 day moving average crossing at 77.96. Second support is this month's low crossing at 75.24.


Crude Oil - The New World Currency

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A Stunning Silver Forecast Comes True, What Next?

From guest analyst David A. Banister at The Market Trend Forecast.com.....

In latter August I penned a forecast for my subscribers to TMTF on Silver, and below is a brief excerpt from August 31st:

I believe Silver is about to stage a pretty large advance based loosely on the Elliott Wave pattern I see unfolding after a 9 odd month consolidation. (Obviously, there are also fundamental fiat currency/debt events worldwide that give it the underlying bull chart pattern). Since the average person can’t run out and buy an ounce of Gold for $1,240 tomorrow, as the unfolding of the fiat crises continues to enter the public psyche, you will see a strong populace movement into buying silver, silver coins, etc. To wit, many silver stocks are moving up strongly of late, signally an imminent breakout of this precious and industrial metal.

The triangle pattern has taken nearly 9 months so far, and a move over $19.50 could start a multi-month run targeting $26-$29 per ounce for starters before a broad pullback.

I bring this up now, some 11 weeks later because Silver did in fact rally up from around $19 per ounce to $29 per ounce, and this was forecast well in advance using my crowd behavioral methodology and pattern recognition. The explosion in price I predicted happened much faster than even I expected, but does show the power of the crowds as they take hold of a new trend or a perceived trend and run with it. Part of the theory to be long silver also had to do with it being “poor man’s Gold”, which I indicated in my forecast. This is also crowd psychology in it’s finest form. People perceive Gold to be “too expensive”, but they can buy silver for only $29 an ounce. To wit, most investors do not really understand the difference between a stock that has 2 billion shares outstanding and one that has 20 million shares outstanding, they only care about price. They often think if a stock is $2 it’s “cheaper” than the stock at $100, little do they realize that a $2 stock that goes to $1 is a 50% loss, but they perceive that as a small risk due to the price. With Silver, you have the mom and pops running out and buying it because it’s “cheaper” than Gold.

Now that Silver has run to $29, my target, and then dropped back, what should expect next? Well, we are in that “broad pullback” I mentioned back in late August that would occur once $29 was hit. Technically speaking and looking at typical crowd behavior, I am expecting consolidation to continue for awhile under $29 per ounce. I call this recent pattern an A B C rally, and once the C wave ends at $29 in this case, forecasting the next move is extremely difficult and can be exasperating. The C wave ran from $19 to $29, and at the tops of those moves everyone is bullish and breathless. Figuring out how the crowd behaves after those patterns is similar to pulling a rabbit out of a hat. With that said, I would expect a 38-50% retracement of the $10 move to about $24 an ounce worst case, and then we should re-attack the $29 highs and likely move into the $32-$34 per ounce range within the next 60 days or so. Silver will continue to out-perform Gold for the foreseeable future as well if I’m right. It appears by my chart below that we already had our initial corrective low, and now we will consolidate and break out.

Consider subscribing to our free reports today by going to Market Trend Forecast.Com, and there you can take advantage of a one time coupon as well. I cover the SP 500, Gold, and Silver on a regular basis.

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Spotting a Trend Reversal in Gold Prices

Jeb Handwerger, editor of GoldStockTrades.com, reveals how he is planning to spot a trend reversal in gold prices.



Gold, Oil & Index ETF Trading Analysis

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Crude Oil on the Defensive

From guest blogger Tim Seymour.....

Between technical factors and a new outbreak of nerves in the Korean peninsula, oil prices are continuing their recent decline this morning. Good chance to shake out the speculators. West Texas Intermediate crude is down another 1% in early trading, cracking back below the $81 level. Traders say the market is reacting to a combination of factors, including the fresh hostilities that emerged overnight between Pyongyang and Seoul, along with rumors that North Korean dictator Kim Jong-Il is dead or dying.

While less dramatic, the dollar is playing a role here too. The dollar index (DXY) has blown through resistance and is now trading back above 79 this morning, largely due to the euro's bailout concerns and a bit of a flight to safe havens bid in global markets. As the dollar appreciates, commodity prices, from oil on down, naturally feel the pressure. And oil in particular is not in bullish technical shape. The price action has already broken below the 50 and 200 day moving averages and is now in the process of testing the 100 day trend as well.

Plenty of guys have been hiding out in the oil market and this is a chance to shake them out. Speculative long positions came down a bit last week, according to the CFTC, but remain very elevated. Meanwhile, look to see USO and the rest of the oil patch decline.

Posted courtesy of Emerging Markets.Com


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Phil Flynn: Crude Oil Is Shell Shocked

North Korea’s shelling of a South Korean Island is raising fears of a global catastrophe and the impact on oil might be dramatic. Overnight in what is being called the most aggressive attack since the Korean War Cease fire back in 1953 North Korea's shelling of South Korea is shaking up global commodity markets. Oil prices are falling with traders seeking safe haven in the US dollar as they wait and try to figure out just what the heck is behind North Korea's aggressive action. North Korea, without provocation, decided to shell a South Korean Island and as reported by the New York Times.

“North and South Korea exchanged artillery fire on Tuesday after dozens of shells fired from the North struck a South Korean Island near the countries’ disputed maritime border. Two South Korean soldiers were killed, 15 were wounded and three civilians were injured", said Kiyheon Kwon, an official at the Defense Ministry. Reuters News reported, “South Korea has warned North Korea it would “sternly retaliate” to any further provocations. There may be a lot of reasons for North Korea’s action. Perhaps it is because their secret nuclear weapons facility was exposed. That led to reports that South Korea’s defense minister saying that South Korea might again might hoist......Read the entire article.




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Financial Markets Tumble on Geopolitical Tensions and Fears over China's Demand

What happened today has drawn a bit of the market focus from sovereign crisis in peripheral European economies. Unfortunately, the incidents only hurt market sentiment further, instead of recovering it. South Korean military reported that North and South Korea exchanged military fire this morning and at least 1 South Korean soldier was killed and 13 injured. Korean won and many Asian currencies weakened as investors sought shelter in the US dollar.

News said that China's biggest banks are close to reach their lending quotas and will stop making new loans to avoid exceeding the limits. Commodities especially oil and base metal prices were pressured as curbs in lending would slow investments and hence demand growth. Gold price remained resilient although early gains were partly pared amid broad based decline in commodity prices.

Tensions between the two Koreas have intensified since March when the sinking of a South Korean warship killed 6 sailors. North Korea denied any responsibility. Yonhap News reported North Korea the morning fired tens of artillery shells near the western border with South Korea, in prompting the South's military to fire back.

The attack has caused at least 1 South Korean soldier was killed and 13 injured. Market sentiment has been badly hurt with equities and growth currencies slumping. The MSCI Asia Pacific Index excluding Japan tumbled more than -2%. While South Korea's KOSPI index slipped -0.79%, Hong Kong's HSI plunged -2.67%, Singapore's Strait Times Index fell -2.03% while China's Shanghai Composite Index slid -1.94%. Korean Won fell -2.60% against the dollar while other currencies also fell.

Rumors said Chinese banks such as Industrial & Commercial Bank of China, Bank of China and Agricultural Bank of China have almost reached their annual lending quotas and will only lend as existing loans are repaid. New loans have reached RMB6.9 trillion as of November, approaching the government's cap of RMB7.5 trillion for the full year. Also weighed on commodity prices was the Customs' final trade data for October. Several commodities showed decline in imports, raising fears that China's demand has moderated. For instance, imports for both copper concentrate and refined copper tumbled -30% m/m in October. Imports for nickel, zinc and lead also contracted during the month.......Read the entire article and charts.



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Crude Oil Technical Outlook For Tuesday Morning Nov. 23rd

Crude oil was lower overnight as it poised to extend this month's decline. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term.

If January extends the aforementioned decline, the 62% retracement level of the August-November rally crossing at 79.24 is the next downside target. Closes above the 20 day moving average crossing at 84.47 would confirm that a short term low has been posted.

First resistance is the 20 day moving average crossing at 84.47
Second resistance is this month's high crossing at 89.10

Crude oil pivot point for Tuesday morning is 81.76

First support is last Wednesday's low crossing at 80.65
Second support is the 62% retracement level of the August-November rally crossing at 78.56


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Venezuelan Black Sea Oil Route Threatens European Supplies

Deliveries of Venezuelan crude to Belarus from the Black Sea may pose a threat to Russian oil supplies bound for central Europe, Russia’s pipeline operator OAO Transneft said. Transneft is preparing a letter to the European Union explaining the situation, Igor Dyomin, a Transneft spokesman, said by telephone in Moscow. “The decision has increased risks to Russian oil deliveries to Europe,” he said.

Belarus reversed the direction of one line in the Druzhba link’s southern branch on Nov. 21 to carry crude east to the Mozyr refinery, Dyomin said. The branch’s parallel line continues to carry Russian oil west to the Czech Republic, Croatia, Slovakia, Hungary and Germany, he said.
Russia and Belarus, which are developing a customs union with Kazakhstan, have clashed over oil export taxes as Russia moved to roll back a discount that allowed Belarus to benefit from cheap oil supplies. Russian Prime Minister Vladimir Putin said the duty may be canceled once a free-trade area is created.

Belarus plans to take delivery of as much as 9 million metric tons of crude from Venezuela next year, a Belarusian presidential administration official said in September. Belarus’s use of the line means Transneft won’t be able to increase deliveries via Druzhba’s southern branch to meet additional winter demand and won’t have an alternative route in case of an accident, Dyomin said.

Transneft supplies to Europe have continued uninterrupted through the second line of Druzhba, which is operating at slightly more than its capacity of 17.5 million tons a year, Dyomin said. The crude Belarus received was Russian oil that Venezuela obtained via a swap at the Black Sea port of Novorossiysk, Dyomin said. The 80,000 ton cargo was carried from the Black Sea to Belarus via Ukraine’s Odessa-Brody pipeline, Dyomin said. The next delivery, of 78,200 tons of oil, is scheduled to arrive at the Odessa port on Nov. 25, Kommersant-Ukraine said yesterday.

“Why Belarus can’t take that same oil via Druzhba is beyond my understanding,” Dyomin said.


Posted courtesy of Bloomberg News. Reporter Stephen Bierman can be contacted in Moscow at sbierman1@bloomberg.net.



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