Over One-Third of Natural Gas Produced in North Dakota is Flared or Otherwise Not Marketed

Source: U.S. Energy Information Administration, based on the North Dakota Department of Mineral Resources.

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Natural gas production in North Dakota has more than doubled since 2005, largely due to associated natural gas from the growing oil production in the Bakken shale formation. Gas production averaged over 485 million cubic feet per day (MMcfd) in September 2011, compared to the 2005 average of about 160 MMcfd.
However, due to insufficient natural gas pipeline capacity and processing facilities in the Bakken shale region, over 35% of North Dakota's natural gas production so far in 2011 has been flared or otherwise not marketed. (It is generally better to flare natural gas than to vent it into the atmosphere because natural gas—methane—is a much more powerful greenhouse gas than carbon dioxide.) The percentage of flared gas in North Dakota is considerably higher than the national average; in 2009, less than 1% of natural gas produced in the United States was vented or flared.

Natural gas production in the Bakken shale. North Dakota natural gas production from the Bakken shale, which is situated in the northwest portion of the State, increased more than 20-fold from 2007 to 2010, and the number of wells producing natural gas increased 7-fold.

Source: U.S. Energy Information Administration, based on the North Dakota Department of Mineral Resources.

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Natural gas infrastructure. The necessary natural gas infrastructure—gathering pipelines, processing plants, transportation pipelines—surrounding the Bakken shale play has not expanded at the same pace, effectively stranding the natural gas that is produced during oil production. A 2010 report by the North Dakota Pipeline Authority highlights an example of this, stating that one county was able to reduce its flaring from December 2008 to December 2009 by 62% with the addition of two new natural gas plants and the expansion of associated gas gathering systems. The report also details several other projects that have either come online recently or are planned to for the immediate future, which may reduce the amount of natural gas flared.

Natural gas flared or otherwise not marketed. The North Dakota Department of Mineral Resources estimated that in May 2011, nearly 36% of the natural gas produced did not make it to market. Most of this gas—29% of the total gas produced—was flared. The remaining natural gas that did not make it to market—7% of total gas produced—is unaccounted for or lost, which means the gas may have been used as lease and plant fuel, or encountered losses during processing or transportation.

Natural gas flaring regulations. According to current North Dakota state regulations, producers can flare natural gas for one year without paying taxes or royalties on it, and can ask for an extension on that period due to economic hardship of connecting the well to a natural gas pipeline. After one year, or when the extension runs out, producers can continue flaring but are responsible for the same taxes and royalties they would have paid if the natural gas went to market.

Crude Oil, Natural Gas and Gold Market Summary For Thursday Nov. 24th

Crude oil closed down $1.66 a barrel at $96.34 on Wednesday. Prices closed near mid-range today and were pressured by a stronger U.S. dollar index and lower U.S. stock indexes. Recent price action in crude hints a near term market top is in place. Crude bulls do still have the overall near term technical advantage.

Natural gas closed up 5.4 cents at $3.615 on Wednesday with prices closing nearer the session high and scoring a bullish “outside day” up on the daily bar chart today. Short covering in a bear market was featured today. Bears still have the solid overall near term technical advantage.

Gold futures closed down $5.00 an ounce at $1,697.50 on Wednesday. Prices closed nearer the session high today, and well up from the daily low, and saw some bargain hunting and short covering late in the session. However, the key “outside markets” were bearish for gold today and kept prices below unchanged. The U.S. dollar index was sharply higher while crude oil and the rest of the commodity sector was lower. Near term technical damage has been inflicted recently.


How to Trade Oil ETFs When $100 Per Barrel is Reached

How to Trade Using Market Sentiment & the Holiday Season

The months of November and December are the second strongest back to back months for the financial markets. Many traders and investors use this time of the year to reap big gains as they close the year out. The fact that most traders and investors are sitting in cash and underweight stocks in their portfolio’s leaves me to believe a Santa Clause rally is just around the corner. Reason being is everyone has cash on hand to buy stocks because they are selling their positions in this pullback we are in right now. I know traders well enough, they will buy back into the market trying to catch the holiday rally in the coming weeks.

Subscribers and myself have been short the SP500 for a couple weeks after watching the broad market become overbought and sentiment levels became overly bullish with greedy pigs thinking they could buy stocks after a massive month long rally that had not pullback. Once the selling started you would either get you head handed to you or you were going to make a killing buying leveraged inverse ETFs.

Those who arrived late to the rally are the ones selling out of their positions this week. The interesting thing about this week’s market condition is that I have not seeing any real panic selling in stocks, and I’m not seeing the volatility index spike in value yet.

What does this mean? Well it means we could actually see another big dip in the market which should last 1-2 days and then we get a sharp reversal to the upside.

Take a look at the SP500 & Volatility index below:

This chart allows us to get a feel for fear in the market. Me being a contrarian trader, I focus on market sentiment extremes. When the masses are losing money hand over fist I’m generally on the other side of that trade with open arms. Trading off fear is one of the easiest ways to trade the market. That is because fear is much more powerful than greed and it shows up better on the charts. Spotting panic selloff bottoms is something that can be traded successfully if you know what to look for and how to trade them.

On the chart you can see the pullbacks in the SP500 which triggered a panic selling spike in my green indicator. What I look for is a pullback in the SP500 and for my panic selling indicator to spike over 20. When that happens I start watching the volatility index for a spike also. The good news is that the volatility index typically rises the following day making my panic indicator more of a leading one…

Market Sentiment Trading

I could write a 20 page report going into depth this with topic, but that’s not the point of this report. Just realize that the stock market is likely going to put in a bottom very soon and likely end with a STRONG panic selling washout this week or next. 

Prepare for a sharp drop in the market which should kick start a holiday rally in the next few trading sessions.

Chris Vermeulen
Just Click Here to visit Chris' site and get his Index, Commodity and Currency Trading Alerts

Let's Get Started Trading Gold, Crude Oil & Index ETF's

Musings: Upcoming Winter Could Be A Repeat Of Last Year's Winter

Recently, ImpactWeather, a Houston based weather forecasting and consulting firm, held a webinar in which they discussed their view of the weather trends that will impact temperatures and precipitation in the United States during both the next 30 days and the winter period of December through February. The bottom line is that the developing La Niña in the South Pacific Ocean is controlling the weather patterns. So far the pattern has allowed an active hurricane season to develop but has contributed to only a few of the storms entering the Gulf of Mexico and making landfall on the U.S. coast.

ImpactWeather showed a chart that contained the various global sea surface temperature (SST) anomalies that are influencing global weather patterns. ENSO (El Niño/La Niña Southern Oscillation) is probably the most prominent SST anomaly, but the Pacific Decadal Oscillation (PDO) Pattern, the Atlantic Multi-decadal Oscillation (AMO) Pattern and the Indian Ocean Dipole (IOD) Pattern are also strong weather influencing factors. As shown in the accompanying chart (Exhibit 3), ENSO and PDO are in their cold phase while the AMO and IOD are in their warm phase.

Exhibit 4. La Niña Dominates Winter Weather
 
Source: ImpactWeather

The impact of the PDO and La Niña phases is best shown by the forecasts showing the deviation in temperatures that can be expected in the future as a result of these patterns. As shown in Exhibit 5, the 2011-2012 winter forecast shows that temperatures should average between 1°C and 1.4°C below normal. The forecast for November called for a 1.4°C lower temperature range, which would seem to be consistent with the cooling that has been experienced since late October. The chart shows a multitude of temperature forecasts generated by computer models, virtually all of them showing negative deviations. If one compares the forecasted temperatures for this winter with the temperatures experienced last winter (the far left side of the chart), they look similar, but the forecasted temperature anomalies don't show the move back to zero as experienced last summer. That would suggest that in the United States we may not experience the extreme heat witnessed last summer. That doesn't mean that the drought conditions will end, but lower temperatures would be a welcome relief......Read the entire Musings From The Oil Patch Article.


Today’s Stock Market Club Trading Triangles

Crude Oil Market Summary and Trend Analysis For Tuesday November 22nd

We are now tracking the January contract. No change in our commentary from yesterday. As mentioned last week, we felt that the crude oil market was topping out. In retrospect, we have confirmation that is indeed the case. We are now expecting and look for support to come in at $94.55 (basis the January contract), which is a 61.8% Fibonacci retracement.

At the present time, both our monthly and weekly Trade Triangles remain in a positive mode, which is the direction of the major long term trend. Resistance is the $100 level. Long term, Intermediate term should be long this market with appropriate money management stops.

Monthly Trade Triangles for Long Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Positive
Daily Trade Triangles for Short Term Trends = Negative

Combined Strength of Trend Score = +85

EIA: North Dakota's Oil Production Has More Than Quadrupled Since 2005

North Dakota's oil production averaged over 460 thousand barrels per day (bbl/d) in September 2011, more than four and one half times its September 2005 level. Although the State's oil production growth slowed during the first few months of 2011, more favorable weather conditions helped operators significantly boost output in June, July, August, and September. North Dakota currently trails only Texas, Alaska, and California among oil-producing States.

The early 2011 slowdown in the State's oil production growth was due in large part to an especially severe winter and spring flooding that hampered exploration and development activity. Through May, monthly increases averaged just over 1%, well below the average monthly production growth of about 3% in 2010.

Source: U.S. Energy Information Administration, based on the North Dakota Department of Mineral Resources.

North Dakota operators reported stronger production gains more recently. In June 2011, oil production averaged 385 thousand bbl/d, an increase of nearly 6% over May. In July, oil production grew by more than 10% from the previous month, averaging 424 thousand bbl/d. Production in August and September rose by 5% and 4%, respectively. According to North Dakota's Department of Mineral Resources (DMR), warmer and dryer weather has resulted in a sharp increase in active drilling rigs and hydraulic fracturing activity as operators escalate exploration and development programs.

Production increases in North Dakota are mainly associated with accelerating horizontal drilling programs in the Bakken shale formation situated in the northwest portion of the State (and extending into Montana and portions of Canada). By combining horizontal wells and hydraulic fracturing (the same technologies used to significantly boost the Nation's shale gas production), operators increased North Dakota's Bakken oil production from less than 3 thousand bbl/d in 2005 to over 230 thousand bbl/d in 2010.

Citing a backlog of over 350 wells awaiting fracturing services, the DMR anticipates further oil production increases through the remainder of 2011 and over the next several years (reaching as much as 750 thousand bbl/d by about 2015, up from its earlier estimate of 700 thousand bbl/d mentioned in This Week in Petroleum). According to the DMR, the State's crude oil takeaway capacity (via pipeline, rail, and truck) is adequate to accommodate near term projected production increases.


Risk Surrounds Gold and the SP 500

Phil Flynn: Arab Spring Sprung

Ah another sign of spring. No, not the weather but the Arab spring. While oil got slammed yesterday on European Sovereign debt woes and fears that France may get a downgrade, the focus today may be on a new round of sanctions on Iran and another revolution in Egypt.

Oh sure it helps too that the rating agencies reaffirmed the US credit ratings after the Super Committee seemed to lose its super powers. Reuters News said, "rating agencies Standard & Poor's and Moody's said there will no immediate downgrade of their credit ratings on the United States due to the failure of a congressional "super committee" to reach an agreement on debt reduction. But Fitch, the third leading ratings agency, which currently has the most positive rating of the three on U.S. debt, said it could cut the outlook on its triple-A" rating, with a downgrade an outside possibility."

Yet while gold and silver plummeted, oil prices fought back off the lows despite the pressure in the outside markets as pictures of violence in Egypt flashed across the TV screen. Word that protesters were demanding an end to the military rule that has been in place since Hosni Mubarak was deposed caused the country's interim cabinet to resign. Yet the masses in the second Egyptian revolution don't seem to be buying it and appear even more determined than some of the "Occupy Wall Street" folks......Read Phil's entire article.


How to Trade Oil ETFs When $100 Per Barrel is Reached

Natural Gas Bulls Score an "Outside Up Day" in Monday Trading

Crude oil [now trading January contract] closed down $0.53 a barrel at $97.14 today. Prices closed nearer the session high today. A stronger U.S. dollar index again today and a sell off in the U.S. stock market pressured energies. Recent price action in crude does hint that a near term market top is in place. Crude bulls do still have the overall near term technical advantage, but they have faded.

Natural gas [also trading January contract] closed up 7.7 cents at $3.573 today. Prices closed nearer the session high today after hitting another fresh contract low early on. Today's price action scored a bullish “outside day” up on the daily bar chart and if there is good follow through buying on Tuesday then that would confirm a bullish “key reversal” up on the daily bar chart, which could be one early technical clue that a market low is finally in place. But right now the bears still have the solid overall near term technical advantage.

December gold futures closed down $56.40 an ounce at $1,668.90 today. Prices closed near the session low today as the market was hammered to a fresh four week low. The key “outside markets” were bearish for gold today, as the U.S. dollar index was firmer and crude oil prices were lower. Near term technical damage has been inflicted recently, including more today. Bears now have the slight near term technical advantage.


Here is a preview of our MarketClub Trade Triangle Chart Analysis and Smart Scan technology

Crude Oil Takes a Bearish Tone as January Contract Comes Into Play

Attention we are now tracking the January contract.

As we mentioned last week, we felt that the crude oil market was topping out. In retrospect, we have confirmation that is indeed the case. We are now expecting and look for support to come in at $94.55 (basis the January contract), which is a 61.8% Fibonacci retracement. At the present time both our monthly and weekly trade triangles remain in a positive mode, which is the direction of the major long term trend. Resistance is the $100 level. Long term, Intermediate term should be long this market with appropriate money management stops.

Combined Strength of Trend Score = +55

Monthly Trade Triangles for Long Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Positive
Daily Trade Triangles for Short Term Trends = Negative


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Risk Surrounds Gold and the SP 500

By JW Jones - Options Trading Signals.com

The current trading environment is one of the most difficult that I can recall in recent memory. Risks abroad regarding the European sovereign debt crisis is keeping market participants on edge as headline risk seemingly surrounds traders at every turn.

In addition to the risk posed by Europe, the market’s reaction to the Congressional Super Committee’s upcoming statements also poses risks. As it stands now, the media is reporting that the committee is in gridlock and has yet to compromise. The deadline for the Super Committee is Wednesday, November 23^rd. The gridlock leads to uncertainty, and Mr. Market hates uncertainty. High levels of uncertainty corresponds with increased volatility levels, thus caution is warranted.

Recently I have been actively trading around the wild price action, but I have been utilizing smaller position sizes in light of the elevated volatility levels. In addition to the smaller position sizes, I have been aggressively taking profits and moving stops in order to protect trading capital.

This past week, members of my service enjoyed two winning trades. We were able to lock in gains on a SPY Put Calendar Spread for a nice 20% gross gain. On Friday we closed a USO Put Calendar Spread for a gross gain of 17%. These trades were relatively short term in duration, but the gains they produced were strong.

Both trades took advantage of increased volatility which resulted in enhanced profits. If volatility remains elevated going forward which I expect, these types of trades will offer great risk / reward going forward. Volatility is an option traders friend, and this past week members of my service were able to lock in some strong gains with relatively muted levels of risk.

Gold Futures

I have not written much about gold recently as I have honestly not seen a great deal of opportunity in either direction there. The price action has been quite volatile, but this past week we saw gold futures sell off sharply. I believe the explanation for the selloff is partially due to strength in the U.S. Dollar. The daily chart of the U.S. Dollar Index is shown below:

The recent selloff in gold can likely be attached to the increase in margin calls around the world as a likely consequence of the MF Global bankruptcy. Uncertainty surrounds the commodities market as the collapse of MF Global has interrupted traditional capital flows and broad based volume around the world. The MF Global situation continues to provide a negative headwind for financial markets in general.

I continue to be a long term bull regarding precious metals as nearly every central bank is either printing money deliberately or is increasing the money supply through quantitative easing. With multiple calls coming out of Europe over the weekend for the European Central Bank to print money to monetize European sovereign debt, it may not be long before the ECB begins their own quantitative easing program. In the long term this can only mean higher prices for gold.

Right now the short term looks bearish for gold as the daily chart of gold futures shows gold tested near the top of a recent rising channel and failed. The selloff was strong, but  a pullback here makes sense from a technical perspective. The daily chart of gold is shown below:

The longer term time frame continues to remain technically positive for the yellow metal. As long as gold prices hold in their multi-year rising channel, higher prices remain likely. Right now the $1,500/ounce price level needs to hold as support if the bulls are going to remain in control in the long term time frame. The weekly chart of gold futures shown below illustrates the long term rising channel:

Right now we are in a seasonally strong period for gold. I am going to be watching closely in coming weeks for a solid entry point to get long the yellow metal for a longer term time frame. Right now the short term remains bearish, but the longer term is bullish from technical and fundamental viewpoints.

S&P 500

The S&P 500 Index sold off sharply during the past week. In my most recent article, I discussed two key price levels to monitor to the downside. The key support levels were the 1,230 and 1,190 price levels respectively. The bulls need the 1,190 area to hold as support to give them any chance for a “Santa Claus Rally” into year end.

Last week the S&P 500 Index closed below the 1,230 support level meaning the 1,190 area has to hold. Otherwise, we could see a sharp selloff into the end of the year. The daily chart of the S&P 500 below illustrates the key support levels:

The S&P 500 looks vulnerable to the downside presently. However, headlines coming out of Europe and/or the Super Committee this week could push prices higher. The key pivot line remains around the 1,257 price level on the daily chart. If the bulls can regain the 1,257 price level on a weekly close a test of 1,290 will become more likely. However, as long as prices remain below 1,230 and 1,257, the S&P 500 is vulnerable to additional downside.

I would not be shocked to see the S&P 500 push higher this week to work off short term oversold conditions. Truncated weeks result in lower than average volume which generally favors the bulls. However, in this environment anything could seemingly happen. Risk is high in either direction.

Subscribers of Options Trading Signals have pocketed more than 150% return in the past few months. If you’d like to stay ahead of the market using My Low Risk Option Strategies and Trades check out my OTS service at Options Trading Signals.com and join the hundreds that are taking home the profits.