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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Commodity Corner: Crude Oil Settles Lower on Weaker Euro

Crude oil on the January contract ended the day at $81.74, a .24 cent decline from Friday, as the euro slipped 0.4 percent against the greenback. Although Ireland has agreed to a bailout plan from the European Union to shore up its banks amid a serious debt crisis, lingering concerns that Portugal and Spain are the next EU countries in line for bailouts were bearish for the euro. Because oil is priced in dollars, a stronger dollar makes it less attractive to buyers holding other currencies.

January crude traded within a range from $80.68 to $82.87 Monday. Oil settled at $81.51 Friday on the December contract, which has expired.

The National Weather Service expects the Midwest and Northeast to experience colder than normal temperatures through next week. Given the regions' anticipated greater electricity demand during this period, December natural gas settled 11 cents higher at $4.27 per thousand cubic feet. It traded from $4.125 to $4.28.

Although the American Automobile Association expects more motorists to be on the road for this year's Thanksgiving holiday, December gasoline ended the day a nickel lower at $2.15 per gallon. The front month gasoline price fluctuated Monday from $2.13 to $2.215.

Posted courtesy of Rigzone.Com

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Sharon Epperson: Where is Crude Oil and Gold Headed on Tuesday?

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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Stock Market and Commodities Commentary For Monday Evening Nov. 22nd

The S&P 500 index closed lower due to profit taking on Monday as it consolidated some of last week's short covering rally. The mid range close sets the stage for a steady opening on Tuesday. Stochastics and the RSI are turning bullish signaling that a short term low might be in or is near. Closes above the 10 day moving average crossing at 1196.94 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 the 10 day moving average crossing at 1196.94. 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 Monday 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 Tuesday. 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 84.56 are needed to confirm that a short term low has been posted. First resistance is the 20 day moving average crossing at 84.56. Second resistance is this month's high crossing at 89.10. First support is last Wednesday's low crossing at 80.06. Second support is the 62% retracement level of the August-November rally crossing at 79.24.

Natural gas closed higher on Monday as it extends last week's rally. Stochastics and the RSI are 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 reaction low crossing at 3.743 are needed to confirm that a short term top has been posted. First resistance is today's high crossing at 4.293. Second resistance is the 38% retracement level of the June-October decline crossing at 4.362. First support is last Monday's low crossing at 3.710. Second support is the reaction low crossing at 3.500.

Gold closed higher on Monday as it extended the short covering rebound off last week's low. The high range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI are turning neutral to bullish hinting that a short term low might be in or is near. Closes above the 10 day moving average crossing at 1369.00 would temper the near term bearish outlook. If December extends the decline off this month's high, the reaction low crossing at 1315.60 is the next downside target. First resistance is the 20 day moving average crossing at 1364.00. Second resistance is the 10 day moving average crossing at 1369.00. 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 higher on Monday ending a three day correction off last week's high. The high range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI are overbought and are turning bearish hinting that a short term top might be in or is near. Closes below the 20 day moving average crossing at 77.87 are needed to confirm that a short term top has been posted. If December renews this month's rally, the 38% retracement level of this year's decline crossing at 80.54 is the next upside target. First resistance is last Tuesday's high crossing at 79.59. 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 77.87. Second support is this month's low crossing at 75.24.


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There’s No Quick Fix for the Global Economy

From guest blogger Adam Hewison......

Regardless of what others might say, there is no quick fix for the global economy. To illustrate this point, a friend of mine recently sent me a chart which I would like to share with you.

This charts shows that we may be going into a prolonged period of no growth in the overall stock market. The NASDAQ peaked at 5,132.52 on March 10th, 2000. The NASDAQ market is in many ways more important than the DOW, and should be considered more of a leading indicator. If that is truly the case, then we have been in a bear market for the last eight years.

Trading throughout the balance of this decade and into the early part of the next decade is going to be the key to survival and for recovering the profits in your portfolio. We strongly recommend that you approach these markets with some level of expertise and knowledge of technical trading.

The future is going to be the future and we need to take advantage of every moment and prepare ourselves to be the very best we can be in whatever business or endeavor we are pursuing.


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Bloomberg: Hedge Funds Cut Oil Bets as Ireland, China Sap QE2 Gains

Hedge funds cut bullish bets on oil by the most in almost three months amid speculation fallout from the Irish debt crisis and China’s efforts to curb inflation will slow economic growth, sapping demand for fuel. The funds and other large speculators reduced so called long positions, or wagers on rising prices, by 15 percent in the seven days ended Nov. 16, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report, released Nov. 19. It was the first drop in four weeks and the largest decline since the seven days ended Aug. 24.

Bets on gains in oil prices climbed to the highest level in at least four years in the week before the Federal Reserve announced it would spend $600 billion buying Treasuries through the second round of so called quantitative easing, or QE2, to keep the economic recovery on track.
Crude rose to a two year high of $87.81 a barrel on Nov. 11 in New York. It has since lost 7.8 percent as Ireland moved closer to a European Union bailout and China, the world’s biggest energy consumer, took steps to curb bank lending.

“The drop from extremely high levels makes perfectly valid sense, given the uncertainty now of QE2 and renewed concern regarding a European banking situation, namely Ireland,” said Kyle Cooper, director of research at IAF Advisors in Houston. “This has led to uneasiness regarding oil demand, and the liquidation occurred in that very large speculative position.” Net long positions dropped by 30,518 futures and options combined to 178,397 the week ended Nov. 16, according to the commission report. These are held by what the CFTC categorizes as managed money, including hedge funds, commodity pools and commodity trading advisers......Read the entire article.



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Dian L. Chu:Natural Gas: Better Days Ahead....in Two Years

Natural gas posted the first weekly increase this month in the week of Nov. 14, on forecasts of colder than normal temperatures in most of the eastern U.S. from Nov. 24 through Nov. 28, which could spur an average 20 percentage rise above the normal heating demand. Natural gas for December delivery down 25 percent this year gained 9.6 percent in one week to settle at $4.164 per Mmbtu on the NYMEX.

However, this temporary seasonal strength does not alter the fact that U.S. gas stockpiles climbed to an unprecedented 3.843 trillion cubic feet in the week ended Nov. 12. A 9.3 percent above the five year average level and 0.3 percent above last year’s level.

As I said before that we are literally swimming in crude oil amid high inventory, but when it comes to natural gas, “drowning” would be a more appropriate description. While crude was hammered by China’s efforts to curb inflation, natural gas has an even bigger problem, nowhere to go, since it is region bound, and not as widely traded.

Worse yet, the latest short term outlook published on Nov.9 by the Dept. of Energy estimates natural gas production will rise in 2010 to the highest level in 37 years. Marketed natural gas production is forecast to increase by 2.5 percent this year, and fall by 1.2 percent in 2011.

However, the drop in 2011 is not because of a decrease in shale gas production, but mostly a result of a 13.5 percent production decline in GOM production from the 2010 drilling moratorium......Read the entire article and see Dian's charts.



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Phil Streible: Gold Prices Trade Sideways

Phil Streible, senior market strategist at Lind-Waldock, is expecting flat gold prices for the short holiday trading week.



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Stephen Schork: Data Bullish for Economy, But Concerning for Nymex Futures

The last time we discussed the domestic producer price index (PPI) and consumer price index (CPI) we stated that “Consumers aren’t feeling the pain… yet.” The CPI for September was flat, whereas analysts were looking for a 0.1% increase and we were specifically concerned that the CPI of food rose just 0.32%, stating “we do not expect this to last.”

In this vein, the latest data (October) saw the CPI for food rise by 0.70%, more than double the previous month’s rate. Before we drill down further, it is worth pulling back to get the big picture. The total PPI rose by 0.4%, below analyst expectations of a 0.8% increase. At the same time, total CPI rose by 0.2%, slightly below the 0.3% gain expected by analysts. We do not believe it a coincidence that these figures were released on exactly the same day that the dollar peaked at the €0.7413 mark.

Despite the indices coming in below expectations, were traders still concerned about inflation? As written in today’s issue of The Schork Report, we don’t believe so. Rather, the drop in the dollar is likely due to money switching towards the equities markets, consider that the dollar hit a local peak on November 16th and has fallen 1.36% since. In comparison, the S&P 500 Index hit a local bottom on November 16th and has risen 1.67% over the same time......Read the entire article.


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Phil Flynn: Babys It's Cold Outside

It may not be cold yet but the first real blast of winter is coming. How do I know that? I am looking at natural gas prices. Despite record supplies, natural gas has been keeping up as Middle America scrambles through our closets to find gloves and ear muffs. Natural gas prices are rebounding from its sharp selloff now testing the high for the month in anticipations of frosty future. Does this signal that the bottom in natural gas has arrived or is this just a great selling opportunity?

In a normal year in gas you might assume that prices would go higher but since the onslaught of new unconventional gas production from shale, now you cannot be too sure. You see according to the Energy Information Agency natural gas proven reserves (those volumes of oil and natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions) rose enough not only to replace production, but also to grow by almost 3 percent over 2007.

In contrast, the EIA says that even though discoveries of crude oil rose for the third year in a row, proved reserves of crude oil fell by more than 10 percent. Under Securities and Exchange Commission (SEC) rules for determining reserves that have been in effect since 1982, operators assessed their 2008 reserves based on what they could produce with reasonable certainty at the market price on the last day of the year......Read the entire article.



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Oil Prices Higher on Ireland Debt Plan, Overnight Short Covering

Oil prices are higher this morning after European and global financial authorities agreed to save debt latent Ireland and protect Europe's wider financial stability. This short covering overnight consolidated some of 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 84.60 would confirm that a short term low has been posted.

First resistance is the 20 day moving average crossing at 84.60
Second resistance is this month's high crossing at 89.10

Crude oil pivot point for Monday morning is 82.13

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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Crude Oil Rises as Irish Bailout Plan May Ease Concern Over European Debt

Crude oil rose, rebounding from its biggest weekly loss in three months, amid optimism that an agreement to rescue Ireland’s banks may reduce European sovereign debt concerns. Futures retraced some of last week’s 4 percent slump after Ireland yesterday applied for a bailout from the European Union and the International Monetary Fund to save its banks. The decision pushed the euro to a one week high versus the dollar, boosting the appeal of commodities to investors.

“The euro debt concerns are easing as Ireland has decided to accept the bailout and that will lead to a weaker dollar,” said Serene Lim, a commodity strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “It’s more of the dollar weakening that’s helping to drive oil higher.” The January contract gained as much as 64 cents, or 0.8 percent, to $82.62 a barrel in electronic trading on the New York Mercantile Exchange, and was at $82.50 at 12:25 p.m. Singapore time. It slipped 44 cents, or 0.5 percent, to $81.98 on Nov. 19. Futures are up 3.7 percent this year.

The December contract expired on Nov. 19, down 34 cents, or 0.4 percent, at $81.51 a barrel. Crude fell at the end of last week after China ordered banks to raise reserves in a move that may slow growth and crimp fuel demand in the world’s largest energy consuming country. “The Irish debt situation has been contained for the moment,” said David Taylor, a market analyst at CMC Markets Ltd. in Sydney......Read the entire article.


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Has The Gold & Silver Play Gone To Greed?

The past few months it seems the gold and silver play has been getting a little crowed with everyone wanting to own gold. While I am a firm believer that these precious metals are a great hedge/investment long term, I can’t help but notice the price action and volume for both metals which looks to me like they are getting exhausted.

Silver – Daily Chart
The silver chart below shows an extremely high volume reversal candle in early November which typically leads to lower prices and some times a major change in the trend. That being said silver remains in an uptrend with the possibility of a bullish pennant forming. On the other hand there is a possible head and shoulders pattern forming. I will be looking for light volume sideways chop keeping a close eye for a possible neckline breakdown or a momentum thrust to the upside for a possible trade.

Gold – Daily Chart
Gold is forming a bullish and bearish pattern also giving us a mixed signal. I am currently neutral on gold and not really looking to take part until we get some type of clear price action.

US Dollar – 60 Minute Chart
The dollar has shown some strength recently. The US dollar play has been to take the short side, and a couple weeks ago we saw the dollar breakdown from yet another consolidation. It seems like everyone shorted the dollar yet again. That could have been a key pivot low for the dollar. On the weekly chart that bounce was off a major support trend line helping add some fuel to the rally I would think.

The chart below shows the recent rally and breakout to the upside. Currently the dollar is pulling back to test the breakout level (support). It will be interesting to see how this week unfolds. If the dollar bounces then we just may see metals break below their necklines to make another heavy volume drop.

Weekly Precious Metals Update:
In short, I have mixed feelings for gold and silver. Yes I think they are good long term plays, but after the run they have had it is also very possible a much deeper correction is about to take place and we may not see new highs for another year. That is a long time to have money sitting in an investment when it can be put to work in other investments. I know the herd (general public) is all head over heals in love with gold and silver which is one of the reasons why I think we are nearing a top if we didn’t already see it a couple weeks ago.

Don’t get me wrong I’m not saying to sell and go short metals....not yet anyways. They are both still in an up trend but some interesting things are unfolding which could cause big action in the coming weeks.

For now please join my trading newsletter and get my ETF trading signals, daily analysis and educational material at The Gold and Oil Guy.com

Chris Vermeulen


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Sunday, A Great Day to Learn How To Use Fibonacci Retracements

Sunday, a quiet day away from the markets. What better way to spend Sunday then to learn how to use Fibonacci retracements in our trading. 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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Natural Gas Weekly Technical Outlook For Sunday Nov. 21st

Natural gas's strong rebound form 3.71 retained the bullish case. That is, it should have bottomed at 3.255 already. Break of 4.249 resistance will indicate that such rebound has resumed and should target falling trend line resistance (now at 4.4 level). On downside, however, break of 3.71 will now confirm that rebound from 3.255 has completed and will turn bias back to the downside for retesting 3.255 low.

In the bigger picture, current development raises the possibility that fall from 6.108 has indeed finished with three waves down to 3.255. That is, it's merely a correction to rebound from 2.409. There is no confirmation of reversal yet and key focus will be on mentioned trend line resistance from 6.108, now at around 4.4 level. Sustained break there will likely pave the way the another high above 6.108 in medium term. Though, a break below 3.255 will turn focus back to 2.409 low instead.

In the longer term picture, question remains on whether 2.409 is the long term bottom already. Downside momentum since 6.108 is so far not too convincing and it looks like 2.409 won't be violated even in case of another fall. On the other hand, natural gas is still limited well below 55 weeks EMA and 55 months EMA and there is no confirmation of reversal yet. We'll stay neutral before a break of 5.194 resistance.

Nymex Natural Gas Continuous Contract 4 Hour, Daily, Weekly and Monthly Charts


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Nigeria Arrests Militants for Seizing Oil Workers

Nigeria's military spokesman says soldiers have arrested a militant leader who authorities believe is responsible for a recent rash of kidnappings of oil workers in the oil rich southern delta.

Lt. Col. Timothy Antigha said Saturday the leader was taken with 62 suspected members of the Movement for the Emancipation of the Niger Delta. Antigha says the leader is known by his nickname, "Obese."

Antigha says the military believes the group kidnapped two Americans, two Frenchmen, two Indonesians, one Canadian and 12 Nigerians in recent weeks from Exxon Mobil Corp. and Afren PLC facilities.

On Wednesday night, a military operation freed 19 hostages in the oil rich region held by MEND _ including seven expatriate workers.

Posted courtesy of INO.Com/AP



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