Phil Flynn: Jobs Baby Jobs!

Oh sure I can talk about Iran and The possibility of cracks showing in the EU oil embargo but let's face it today at least for awhile it jobs baby jobs! The oil market has been driven to and fro with a lot of bullish and bearish forces at play but the strength of the US jobs market will be the determining g factor as to wither we go higher or lower today. Oil was able to shake off a bearish Department of Energy Inventory report in part because there are worries about the resolve of Europe to embargo Iranian oil.

Other counties such as Japan and other Asian refiners are looking for alternative sources of oil which of course would be short term bullish. Yet with weak demand short term right now there is no fear that there will be a shortfall of oil. But back to the bullish word that China will imports a record amount of oil in 2012 as they look to rebuild and expand their strategic reserves. And on balance strong economic data in the US! Now the final piece of all of these forces will be Jobs, baby Jobs.

Reuters News Reported that " Japan's biggest refiner JX Nippon Oil & Energy Corp is talking with top exporter Saudi Arabia and other oil producers to source crude to replace any disruption to its imports from Iran, the company's president said on Thursday. Fresh U.S. sanctions on Iran over its nuclear program could make it difficult for refiners in Japan, Iran's number three crude buyer, to pay Tehran for its oil. Japan is seeking an exemption to U.S. sanctions that President Barack Obama signed into law on Saturday. The sanctions, if enforced, would penalize financial institutions for undertaking transactions with Iran's central bank, exposing the U.S. operations of Japanese banks that deal with Iran."

Bloomberg News Reported " The leader of financially struggling Italy questioned the scope and timing of a possible European Union halt to Iranian oil purchases, raising an obstacle to stiffer sanctions on Iran’s nuclear activities. Penalties set to be announced on Jan. 30 should be phased in and exempt crude sold by Iran to pay off debts to Eni SpA, Italy’s largest oil company, Prime Minister Mario Monti said. “An oil embargo is conceivable as long as it remains gradual and excludes the deliveries that serve to reimburse the billion euros in debts that Iran owes to Eni, our national company,” Monti told France’s Le Figaro in an interview published today.

Europe’s sanctions threat and an Iranian demand that U.S. warships stay out of the Persian Gulf have stirred new tensions between Iran and the West, contributing to higher energy prices. EU sanctions decisions require that all 27 member states go along. An oil supply dislocation might further damage the economies of Italy and Greece, two countries at the forefront of the European debt crisis. Italy is battling to get by without a bailout and Greece is seeking a second package.


Phil Flynn can be reached at pflynn@pfgbest.com


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Iran Tension Fails to Push Crude Oil Through Resistance

Crude oil closed lower due to profit taking on Friday as it consolidates some of the rally off December's low. The mid range close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term.

If February extends the rally off December's low, the 75% retracement level of the 2011 decline crossing at 104.84 is the next upside target. Closes below the 20 day moving average crossing at 98.86 would signal that a short term top has been posted.

First resistance is Wednesday's high crossing at 103.74. Second resistance is the 75% retracement level of the 2011 decline crossing at 104.84. First support is the 10 day moving average crossing at 100.78. Second support is the 20 day moving average crossing at 98.86.


Precious Metals, Equities and Crude Oil Long Term Outlook

Rigzone: Crude Ends Lower On Weak Equities, Dollar Gains

Crude oil futures fell Friday despite an improving U.S. jobs picture as traders focused on declines in equities markets and a stronger dollar.

Light, sweet crude oil for February delivery settled 25 cents, or 0.3%, lower at $101.56 a barrel on the New York Mercantile Exchange after trading as high as $102.80 earlier in the session. Brent crude oil on the ICE Futures exchange rose late in the session to trade 80 cents higher at $113.06 a barrel.

After trading higher early Friday, a lower opening for the U.S. stock market held oil futures in negative territory. Equities have served as a guide for oil prices in recent months, and worries about Italy's debt situation kept investors from cheering an improving U.S. employment picture.

A stronger dollar against the euro also took some wind out of the oil market. A rising dollar typically weighs on oil as it makes crude oil more expensive for buyers in other currencies.....Read the entire article.


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EIA: Current Natural Gas Forward Prices Signal Rising....But Still Low Prices in 2012

Source: U.S. Energy Information Administration, based on Bloomberg.

Note: Forward prices are derived each month (January-December) by adding the locational basis swap to the NYMEX Henry Hub futures price for the given month at each location. The ranges reflect the minimum and maximum monthly price for months in 2012. For example, a January 2012 NYMEX Henry Hub futures contract valued at $3.50/MMBtu and a January 2012 Transco Zone 6-NY basis swap valued at $2.50/MMBtu would yield a $6.00/MMBtu price at Transco Zone-6 NY.

---

Natural gas forward market prices (as of December 28, 2011) signal a continuation of low natural gas prices into 2012. Winter 2011-2012 forward prices were recently the lowest in over ten years, and, of the eight trading points identified, only Transco Zone 6-NY (New York City) and PG&E Citygate (Northern California) show 2012 forward monthly price ranges that include prices above $4/MMBtu. Natural gas spot prices remained low throughout 2011 relative to prior years, reaching a two-year low in November. The spot natural gas price at Transco Zone 6 New York, shown in the graph, is above next year's average monthly trading ranges due to recent cold weather-driven demand. Current spot natural gas prices are lower than the 2012 forward contract range at several natural gas trading points identified in the chart.

The natural gas price at the Henry Hub in Louisiana informs much of the rest of the country, with prices largely following price movements at Henry. Similarly, forward prices, except for the Northeast (represented here by the Transco Zone 6-NY trading point), closely mirror 2012 forward prices at the Henry Hub. Northeast gas prices behave differently, with spot and forward prices higher during colder months due to expectations regarding pipeline constraints in transporting natural gas to the Northeast during times of high natural gas demand.

Source: U.S. Energy Information Administration, based on Ventyx's Energy Velocity Suite.

Phil Flynn: The Widow Maker Is Making OUT

They of course call it the widow maker or the unimaginative perhaps the heating oil gasoline spread. The Spread has been soaring as the heating oil market is reflecting all of the news that can pact supply by the preponderance of news that has driven oil. The news is getting more bullish for heating oil, diesel and fuel oil and more bearish for oil.

Whether you are talking about the agreement in principle by the European Union to impose an oil embargo on Iran or the closure of Petro Plus refineries in Europe the spread just continues to soar. Of course the other side of that coin is the fact that gasoline demand is weak. As we told you the EU will move forward on an oil embargo and the US made it harder for Iran to sell oil by new banking sanctions. This will tighten Distillate supply in Europe while gasoline demand is tanking!

The MasterCard Spending Pulse showed just how weak by reporting that Gasoline demand in the United States plunged 1.297 million bpd or 13.7% to 8.160 million bpd during the week ended Dec. 30, according to data released today by SpendingPulse, which is published by MasterCard Advisors, the professional arm of MasterCard Worldwide.

SpendingPulse reported 57.122 million bbl of gasoline was sold at retail outlets during the week reviewed, tumbling 9.079 million bbl versus the prior week. While the market was focused on the Iranian drama and word that the EU as expected would put on sanctions the good news was that French refiners decide not to call for a national strike. Also Heating oil is getting a boost from the return of winter, that north eastern cold blast is driving prices in many commodities. Even OJ is soaring as fears that a freeze in Florida may do damage to the Orange trees.

And a frosty reception the French 10 year auction may give us a break to get long. Gold looks like it has hit bottom. Now some say that gold rallied in response to the EU sanctions on Iran but it seems strange that oil fell back and gold did not. It shows you that there is something more to the gold rally. Gold of course did perform better in terms of the Euro as safe haven European buying seemed to gravitate towards the yen Silver on the other hand was weaker.

Of Course despite the recent weakness in silver and it ignominious correction the average annual price of $35.12 per ounce last year, set a new price record and was a 74% gain over the 2010 average annual price of $20.19 per ounce. We are seeing some long gold short silvers as the small investors are not ready to believe in the precious metals rally just yet.

Natural Gas could not stay below $300 for very long. A blast of winter and a upcoming injection report more than likely cause some short covering. That is despite a warm up in the Midwest! Winter? What winter? We should see a 76 bcf withdrawal and will leave supply at a record high for this time of year.

More Rain In Argentina? Maybe? The Beans pull back a bit Some experts are saying that id Argentina crop could be down by 2 to four million tons but could lose as much as 10 million if they do not get rain.


Check out Phil's service by emailing him at pflynn@pfgbest.com


Precious Metals, Equities and Crude Oil Long Term Outlook

Crude Oil Bulls "Cling" to Bullish Trade Triangles

Crude oil closed lower due to profit taking on Thursday as it consolidates some of the rally off December's low. The low range close sets the stage for a steady to lower opening on Friday. Stochastics and the RSI are overbought but remain bullish signaling that sideways to higher prices are possible near term.

If February extends the rally off December's low, the 75% retracement level of the 2011 decline crossing at 104.84 is the next upside target. Closes below the 20 day moving average crossing at 98.84 would signal that a short term top has been posted.

First resistance is Wednesday's high crossing at 103.74. Second resistance is the 75% retracement level of the 2011 decline crossing at 104.84. First support is the 10 day moving average crossing at 100.55. Second support is the 20 day moving average crossing at 98.84.

Crude oils chart Analysis Score of +90 this market remains very much in a strong upward trend, despite today’s pullback. The crude oil market has resistance starting at $104 up to the $105 level. Long and intermediate term traders should be long this market with appropriate money management stops. Monthly, weekly and daily Trade Triangles all remain bullish.


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ONG: Crude Oil Daily Technical Outlook For Thursday Jan. 5th

Crude oil lost some upside momentum after breaching 103.37 resistance but retreat is so far shallow. Intraday bias remains on the upside and sustained break of 103.37 will confirm resumption of whole rise from 75.94 and should target 114.83 key resistance next. Meanwhile, break of 98.30 support is needed to signal topping. Otherwise, we'll stay cautiously bullish in crude oil even in case of deeper retreat.

In the bigger picture, fall from 114.83 has finished at 74.95 already. The structure suggests it's merely a correction or part of a consolidation pattern. Hence, rise from 33.2 is not completed yet. As long as 89.16/17 support holds, we'd favor a break of 114.83 resistance to resume the rally from 33.2. However, break of 89.16/17 will indicate that rebound from 74.95 has completed and whole fall from 114.83 is possibly resuming for another low below 74.95.

Nymex Crude Oil Continuous Contract 4 Hour, Daily, Weekly and Monthly Charts


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EIA: The Strait of Hormuz is the World's Most Important oil Transit Choke Point

The Strait of Hormuz (shown in the oval on the map), which is located between Oman and Iran, connects the Persian Gulf with the Gulf of Oman and the Arabian Sea. Hormuz is the world's most important oil choke point due to its daily oil flow of almost 17 million barrels per day (bbl/d) in 2011, up from between 15.5-16.0 million bbl/d in 2009-2010. Flows through the Strait in 2011 were roughly 35% of all seaborne traded oil, or almost 20% of oil traded worldwide.

On average, 14 crude oil tankers per day passed through the Strait in 2011, with a corresponding amount of empty tankers entering to pick up new cargos. More than 85% of these crude oil exports went to Asian markets, with Japan, India, South Korea, and China representing the largest destinations.
At its narrowest point, the Strait is 21 miles wide, but the width of the shipping lane in either direction is only two miles, separated by a two mile buffer zone. The Strait is deep and wide enough to handle the world's largest crude oil tankers, with about two-thirds of oil shipments carried by tankers in excess of 150,000 deadweight tons.

Several alternatives are potentially available to move oil from the Persian Gulf region without transiting Hormuz, but they are limited in capacity, in many cases are not currently operating or operable, and generally engender higher transport costs and logistical challenges.

• Alternate routes include the 745-mile Petroline, also known as the East-West Pipeline, across Saudi Arabia from Abqaiq to the Red Sea. The East-West Pipeline has a nameplate capacity of about 5 million bbl/d, with current movements estimated at about 2 million bbl/d.
• The Abqaiq-Yanbu natural gas liquids pipeline, which runs parallel to the Petroline to the Red Sea, has a 290,000-bbl/d capacity.
• Additional oil could also be pumped north via the Iraq-Turkey pipeline to the port of Ceyhan on the Mediterranean Sea, but volumes have been limited by the closure of the Strategic Pipeline linking north and south Iraq.
• The United Arab Emirates is also completing the 1.5 million bbl/d Abu Dhabi Crude Oil Pipeline that will cross the emirate of Abu Dhabi and end at the port of Fujairah just south of the Strait.
• Other alternate routes could include the deactivated 1.65-million bbl/d Iraqi Pipeline across Saudi Arabia (IPSA) and the deactivated 0.5 million-bbl/d Tapline to Lebanon.

EIA's World Oil Transit Chokepoints analysis brief contains additional information about other chokepoints, and the Middle East & North Africa overview contains additional information about countries in the region.

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ONG: Crude Oil Daily Technical Outlook For Wednesday Jan. 4th

The retreat from 101.77 was relatively brief and crude oil got strong support from 4 hours 55 EMA. Subsequent rally sent crude oil back to 103.18 so far. Intraday bias is back on the upside for 103.37 resistance. Break there will confirm that rise from 74.95 has resumed and should target 114.83 resistance next. On the downside, below 98.30 minor support will dampen this immediate bullish view and flip bias back to the downside to extend the consolidation from 103.37 instead.

In the bigger picture, fall from 114.83 has finished at 74.95 already. The structure suggests it's merely a correction or part of a consolidation pattern. Hence, rise from 33.2 is not completed yet. As long as 89.16/17 support holds, we'd favor a break of 114.83 resistance to resume the rally from 33.2. However, break of 89.16/17 will indicate that rebound from 74.95 has completed and whole fall from 114.83 is possibly resuming for another low below 74.95.

Nymex Crude Oil Continuous Contract 4 Hour, daily, Weekly and Monthly Charts


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Will Crude Oil be the New Gold Standard in 2012?

Crude oil is on the move. Tensions, technicals and Trade Triangles are propelling crude oil higher!

February crude oil closed higher on Tuesday as it extended the rally off December's low. The high range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI remain neutral to bullish signaling that sideways to higher prices are possible near term.

If February extends the rally off December's low, November's high crossing at 103.28 is the next upside target. Closes below the 20 day moving average crossing at 98.70 would signal that a short term top has been posted.

First resistance is November's high crossing at 103.28. Second resistance is the May 2011 high crossing at 105.34. First support is the 20 day moving average crossing at 98.70. Second support is the 38% retracement level of the October-November rally crossing at 92.73.

With a Chart Analysis Score of +100, this market is in a strong upward trend. The crude oil market has resistance starting at $102 up to the $103 level. Long and intermediate term traders should be long this market with appropriate money management stops.

Monthly Trade Triangles for long term trends is bullish. Weekly Trade Triangles for intermediate term trends is bullish. And daily Trade Triangles for short term trends are bullish.

Just click here to check out Adam Hewisons first video of 2012.


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Simple 2012 Trends to Profit from Next

Happy New Year, from everyone here at The Crude Oil Trader!

We hope this week's price action didn't catch you off guard? It was profitable but you really had to be on the ball to pocket the gains.....

Anyways, we just wanted to wish you a New Year and thank you for being part of our success in 2011 before it’s too late.

Have you heard of Chris Vermeulen? He is one of our partners here and he has been hitting the cover off the ball when it comes to trading the indexes, commodities and the dollar. His daily pre-market technical analysis videos are interesting, timely, educational and traded with amazing accuracy every week.

Chris is doing his onetime new year’s special offer giving his premium trading & education service away at half price until Dec 31st at midnight. At that price you just cannot go wrong.

Just Click Here to read Chris’ Trade Ideas for 2012

Have a happy and safe New Year's!
Ray @ The Crude Oil Trader

Five Best Trade Ideas for the Next Two Weeks

The last week of the year volume tends to be light due to the fact that big money traders are busy enjoying the holidays and waiting for their yearend bonuses.

I was not planning on doing much this week because of the low volume but after reviewing some charts and risk levels on my top 5 trading vehicles I could not help but share my findings with everyone last Friday.

You can see what I talked about on Friday here > Holiday Short Squeeze & Crude Oil Trade Idea

This Wednesday turned out to be an exciting session with all 5 of my trade ideas moving in our favour right on queue.

Charts of the 5 investments moving in the directions we anticipated …
- Dollar bounced off support

- Stocks are topping and selling off today

- Oil looks to have topped and is selling off

- Gold and Silver are moving lower

- VIX (Volatility Index) just bounced

Many of my readers took full advantage of my recent analysis and trade ideas which is great to hear.  All the different ways individuals used to make money from Friday’s analysis is mind blowin......

The most common trade is the oil one with most traders adding more to Tuesday when the price reached its key resistance level on the chart. Also many traders took partial profits Wednesday locking in 3% or more in two days using the SCO ETF.

It’s amazing how many people like to trade the vix using ETFs. The best trade from followers thus far was an 8% gain in TVIX which was bought 4 days ago anticipating the pop in volatility which I had been talking about last week. Keep in mind ETFs for trading the vix are not very good in general. I stay away from them, but TVIX is the best I found so far.

Currently stocks are oversold falling sharply from the pre-market highs. Meaning stocks have fallen too far too fast and a bounce is likely to take place Thursday.

Also we saw some panic selling hit the market today with 14 sellers to 1 buyer. That level tells me that the market needs some time to recover and build up strength for another selloff later this week or next. We will see this pause unfold when the SP500 drifts higher for a session or two with light buying volume. This will confirm sellers are in control and give us another short setup.

In my Wednesday morning video I explained how/where to set stops when using leveraged ETFs because I know 90% of traders using them do not have a clue as to how to do this and they get shaken out of their trades just before a top or bottom. 

I hope this helps you understand things more...... Over time you will pickup on a lot of new trading tips, tools and techniques with this free newsletter so just give it time and keep trades small until you are comfortable with my analysis.

Just click here to get My FREE Weekly Newsletter Here

Chris Vermeulen

Market Looks Poised to Reverse Hard to Downside Within Days

The market has been in the process of a near 13 Fibonacci week corrective rally since the October 4th 2011 lows at 1074 on the SP 500. So far the highs reached on the initial rally of 218 points were in October at 1292. That has remained the high water mark as we have consolidated over the last many weeks. I expect the market to complete this counter trend ABC bounce during the Dec 27th-29th window, followed by a good sized correction into Mid-January ahead of the earning season.

The patterns that I am seeing are based on crowd behavioral “Elliott Wave” analysis that I perform at my TMTF and ATP services, and this analysis now favors a 70% probability of a bearish decline beginning very shortly to the 1150’s area on the SP 500 index. To wit, Investment Advisors in recent surveys have over 45% Bulls and only 30% bears with typical tops forming around 47-48% Bulls in surveys. In addition, the rally has been on light volume and recent action seems to be forming a rising “bearish wedge” pattern at the same time.

Reversals in the market often come when few expect it whether they come near bottoms or tops. My most recent forecasts called a bullish turn after Thanksgiving Day when most were bearish in the 1160’s on the SP 500 index. We then rallied 109 points to a 1267 high, which we are retesting now. As we recently pulled back into the low 1200’s, I again said to watch for a major market turn on Dec 20th. We then immediately rallied so far into the 1270 area from the 1203 lows.

Below is a chart I sent to my subscribers on Dec 24th, having projected a continuing rally into the 27th-29th window of trade. If you’d like to benefit from our market turn calls and crowd behavioral based pattern analysis on the SP 500 and Gold and Silver, check us out at Market Trend Forecast to sign up for our free forecast or get 33% holiday discount on our premium gold and silver forcecast.

David A Banister

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Merry Christmas Crude Oil Bulls.....From Iran to You!

Crude oil bulls get a Christmas gift from our friends in Iran, but will it hold? Oil closed above $100 a barrel for the first time in nearly two weeks on geopolitical news out of Iran along with the perception of U.S. consumer confidence. The higher close extended the rally off last week's low. This high range close sets the stage for a steady to higher opening on Wednesday.

Stochastics and the RSI remain bullish signaling that sideways to higher prices in crude oil are possible near term. If February extends last week's rally, the reaction high crossing at 102.56 is the next upside target. If February renews the decline off November's high, the 50% retracement level of the October-November rally crossing at 89.46 is the next downside target.

First resistance is the reaction high crossing at 102.56. Second resistance is November's high crossing at 103.28. First support is the 38% retracement level of the October-November rally crossing at 92.73. Second support is the 50% retracement level of the October-November rally crossing at 89.46.

A Play on SCO This Week.....a Short Squeeze & Crude Oil Trade Idea

Holiday Short Squeeze & Crude Oil Trade Idea

Typically, the week before Christmas, stocks and commodities drift higher due to the lack of participants.  Light volume favours higher prices, which is why stocks want to rise going into the holiday season.

The big money players, like hedge fund managers, are finished for the year. They’re sitting on the sidelines enjoying the holiday season while waiting for their year-end bonus checks.

Let’s take a quick look at how the week finished......

Friday was an interesting session as stocks and oil reached some key resistance levels.  Below are my thoughts, charts, and a possible trade idea for next week.

Gold & Silver Thoughts:

Looking at the long term charts of gold and silver, I feel they could head much lower in the first quarter of 2012.  The inverse relationship between the dollar index and gold makes me think this is a high probability scenario.

The weekly dollar index chart remains strong at this point and could start another very strong rally any day. Once the dollar starts heading higher, expect precious metals to move down along with equities.

SP500, Dollar and Volatility Index

Below are three charts stacked on top of each other.  They are marked with my analysis and thoughts for next week.  Personally, I don’t feel shorting stocks is a safe play.  The last week of the year, we can see the volatility index (VIX), and the dollar, rise without putting pressure on stocks.  So be aware of that.

TRADE IDEA – View Chart:

Crude oil looks like a great low risk opportunity (a real “Christmas” present!) from Mr. Market. SCO would be the ETF for US based traders.  HOD, which is listed on the TSX, is good for Canadians.  I favour this setup because I don’t feel that oil will be as affected from the holiday bulge as will American equities.

Pre-Holiday Trading Conclusion:

I was planning on avoiding the market Friday, but the charts were calling my name......  The session ended with what looked to be a short squeeze. The remaining short positions didn’t get their expected drop in price.  Consequently, when the traders all started to cover their shorts (buy) just before the close, it caused a strong surge higher.

I do not recommend shorting stocks next week because of the light volume.  However, oil looks good to me.

Just thought I would share my end of the week thoughts, and wish you a Merry Christmas!

Cheers!

Chris Vermeulen

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Gold and Silver on the Verge of a Big Move

The past few months have been tough for those holding precious metals stocks, PM futures contracts or physical bullion. With silver is trading down 41%, precious metals stocks down 30% and gold 15%. It has people scratching their head.

The question everyone keeps asking is when can I buy gold and silver?

Unfortunately that is not a simple answer. With what is unfolding across the pond and the bullish outlook for the US Dollar index the next move is a coin toss. That being said, I do feel a large move brewing in the market place so I am preparing for fireworks in the first quarter of 2012.

If you step back and look at the weekly trend charts of the dollar index and the SP500 index you will see the strength in the dollar along with a possible stop in equities forming. What these charts are telling is that in the next 3 months we should know if stocks and commodities are going to start another multi month rally or roll over and start a bear market sell off.

With the holiday season nearing, hedge fund managers sitting on the sidelines just waiting for their yearend performance bonuses, I cannot see any large selloff start until January. Selloffs in the market require strong volume and the second half of December is not a time of heavy trading volume. This leaves us with a light volume holiday season, major issues overseas and no big money players willing to cause waves.

So let’s take a quick look at the charts as to where the line in the sand it for the dollar index, gold and silver.

Dollar Index Daily Chart

This week we have seen a strong shift of money out of risk off assets (Bonds) and into risk off (Stocks). This shift is happening before the dollar has broken down indicating the dollar may be topping and could be an early warning of higher stocks prices going into year end. Also note that light volume market conditions also favour higher prices.

Gold Price Daily Chart

Gold could still head lower but at this point it is holding a key support level. If we see the dollar breakdown below its green support trendline then I expect gold to have a firm bounce to the $1675 – $1700.

Silver Price Daily Chart

Silver continues to hold a key support level. If the dollar breaks down the silver should bounce to the $31.50 – $32 area. But if the dollar continues to rally then silver and gold may drop sharply.

Mid-Week Trend Conclusion:

In short, I think the best thing to do is enjoy the holiday season with family and friends. Trading right now is not that great and with the market giving mixed signals. I am keeping my eyes on the market in case it flashes a low risk setup and I will keep you informed if we get one.

Be aware that Monday is a holiday and once January arrives the market could go crazy again. If you want all my swing trades that I personally do be sure to join my alert service The Gold & Oil Guy.Com

Happy Holidays to you and your loved ones!

Cheers,
Chris Vermeulen

ONG: Crude Oil Daily Technical Outlook For Wednesday Dec. 21st

The strong rebound in crude oil and break of 95.99 minor resistance argues that the correction pattern from 103.37 might be completed with three waves down to 92.52 already. Intraday bias is back on the upside for 102.44/103.37 resistance zone first. Break will confirm resumption of the whole rise from 74.95 and should target a test on 114.83 key resistance. On the downside, though, below 92.52 will invalidate this bullish case and bring further pull back towards 89.16/7 support zone.

In the bigger picture, fall from 114.83 has finished at 74.95 already. The structure suggests it's merely a correction or part of a consolidation pattern. Hence, rise from 33.2 is not finished yet. As long as 89.16/17 support holds, we'd favor a break of 114.83 resistance to resume the rally from 33.2. However, break of 89.16/17 will indicate that rebound from 74.95 has completed and whole fall from 114.83 is possibly resuming for another low below 74.95.

Nymex Crude Oil Continuous Contract 4 Hour, Daily, Weekly and Monthly Charts

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Geopolitical Worries Boost Crude

Crude oil futures jumped nearly 3.6 percent Tuesday, driven by worries that geopolitical tensions could impede global supplies, as well as encouraging U.S. economic data that boosted the stock market as well.

Light, sweet crude for January delivery ended the day up $3.34, at $97.22 a barrel on the New York Mercantile Exchange. Brent crude on the ICE Futures Europe exchange settled up $3.09, or 3 percent, to $106.73 a barrel. The January Nymex contract expired at the end of trading Tuesday; the February contract, which becomes the front month contract Wednesday, settled up $3.19 to $97.24. Volume was light in both contracts, at about half the average because of the holiday week.

Iranian news dominated the oil market. Leaders of 11 nations including the U.S. and Saudi Arabia were scheduled to meet Tuesday to discuss sanctions of Iranian oil exports. Iran is the world's third largest oil exporter, supplying 2.2 million barrels per day to the world. Though the U.S. does not buy crude from Iran, the fear is that an already tight global supply portfolio would be further pinched. The U.S. and other western countries are targeting Iran's oil and financial sectors in response to Iran's nuclear ambitions. Meanwhile, the Pentagon sought to downplay comments by U.S. Defense Secretary Leon Panetta saying Iran could have a nuclear weapon in a year or less. Separately, Iran invited UN weapons inspectors into the country.

Concerns were also rising over an apparent breakdown in Iraq's central government, just as the oil industry there is beginning to show signs of progress in its recovery from the war. And in Kazakhstan, the government declared a state of emergency in the Caspian oil town of Zhanaozen after clashes between laid-off oil workers and security forces during an anti-government protest, and at least 11 people were reported killed. Kazakhstan exported 1.5 million barrels of oil a day in 2010.

"There is an undercurrent in crude oil with the issues happening in the Middle East, and the massacre in Kazakhstan," said Bill O'Grady, chief market strategist for Confluence Investment Management in St. Louis. "It's just further evidence that you've got unrest in energy producing areas...It's just like, 'Oh my God, another energy producer. What's next, are we going to start having riots in Texas?"

Crude oil was also boosted by a report from the Commerce Department saying housing starts increased to the highest level in 19 months. Stocks soared as well, with the Dow Jones Industrial Average up 325 points in mid-afternoon. Front month January reformulated gasoline blendstock, or RBOB, rose 8.96 cents, or 3.6 percent, to $2.5787 a gallon. January heating oil was up 6.9 cents, or 2.5 percent, to $2.8494 a gallon.

Posted courtesy of Rigzone

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Phil Flynn: The Hopes and Fears!

The Hopes and fears of oil traders are met in the Euro Zone tonight! There is nothing like a good Spanish bond auction and a strong German consumer confidence number to get our minds off Mario Draghi. German confidence unexpectedly gained and Spain sold 7.4 billion dollars in T-bills in a successful bond auction with a reasonable yield of 1.735% on the three-month T-bills, down from 5.11% at the previous sale on Nov. 22, and it paid an average yield of 2.435%, down from 5.227%.

It is all about hopes and fears and that has been the dominate force driving oil this year and in recent days. The hopes that the Euro zone would step up to the table with a big bazooka to put the Euro break up fears to rest were dashed. Mario Draghi is a drag and is making it clear that a Euro bond is highly unlikely. Yet the German consumer confidence is showing that Europe might be more resilient than thought and downgrade fears might not be coming as fast and furious as previously thought .Dow Jones reports that Fitch Ratings says the 'AAA' rating on debt issues of the European Financial Stability Facility (EFSF) largely depends on France and Germany retaining their 'AAA' status.

The revision of the rating outlook on France to negative last Friday implies that the risk of a downgrade of EFSF debt has increased. We affirmed France's 'AAA' status but warned that that there is a slightly greater than 50% chance of a downgrade within the next year or two. This is therefore also the case for the 'AAA' ratings assigned to the EFSF's debt issues, unless additional credit enhancement mechanisms are introduced. The 'AAA' ratings assigned to EFSF debt issues rely on the EUR726bn of irrevocable and unconditional guarantees provided by the euro member states, and on the conservative guidelines the EFSF sets itself regarding debt management and liquidity risk.

Of the guarantees and over guarantees from 'AAA' rated member states, France and Germany provide EUR369.6bn, or over 80%. Although the EFSF could potentially remedy a downgrade of a small 'AAA' guarantor by increasing the size of its cash reserve or through additional credit enhancements, this would be far more challenging if a larger guarantor like France or Germany were downgraded. The primary source of ratings risk for EFSF debt issues is therefore the possibility that one or more of its largest 'AAA' guarantors is downgraded.

Oil may be also getting a boost from the Dow Jones report that, “Saudi King Abdullah is urging neighboring states to join in a formal Gulf union to confront what he called rising threats to their security and stability, as Gulf leaders convened to discuss regional uprisings and growing Arab worries over Iran. You must realize that our security and stability are threatened and we need to live up to our responsibilities," King Abdullah told the leaders of the five other nations of the Gulf Cooperation Council, gathered in Riyadh in their first annual GCC meeting since the Arab uprisings began. "

The Gulf's monarchies, emirates and sheikhdoms risked losing all if they failed to combine their efforts, Abdullah said. "So I ask you to go beyond the stage of cooperation, to a union in a single entity. King Abdullah gave no immediate public details of how he envisioned such a union taking shape, or operating. Gulf officials had said earlier that the two day meeting launched Monday would address greater cooperation in the military realm and others. The GCC comprises Saudi Arabia, Kuwait, Qatar, the United Arab Emirates, Oman and Bahrain.” Stay tuned.


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Crude Oil, Natural Gas and Gold Market Commentary For Monday Evening Dec. 19th

Crude oil closed slightly higher due to short covering on Monday as it bounces off support marked by the 38% retracement level of the October-November rally crossing at 92.68. The high range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI are oversold but remain bearish signaling that sideways to lower prices are possible near term. If January extends this month's decline, the 50% retracement level of the October-November rally crossing at 89.37 is the next downside target. Closes above the 20 day moving average crossing at 98.10 are needed to confirm that a short term low has been posted. First resistance is the 20 day moving average crossing at 98.10. Second resistance is last Tuesday's high crossing at 101.25. First support is the 38% retracement level of the October-November rally crossing at 92.68. Second support is the 50% retracement level of the October-November rally crossing at 89.37.

Gold closed lower on Monday and the low range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If February extends this month's decline, September's low crossing at 1543.30 is the next downside target. Closes above the 20 day moving average crossing at 1688.70 are needed to confirm that a low has been posted. First resistance is the 10 day moving average crossing at 1695.50. Second resistance is the 20 day moving average crossing at 1688.70. First support is last Thursday's low crossing at 1562.50. Second support is September's low crossing at 1543.30.

Natural gas closed lower on Monday as it extends this year'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 this year's decline, monthly support crossing at 2.409 is the next downside target. Closes above the 20 day moving average crossing at 3.425 are needed to confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 3.271. Second resistance is the 20 day moving average crossing at 3.425. First support is today's low crossing at 3.050. Second support is monthly support crossing at 2.409.

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