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Crude oil appears to set a near term bottom

Crude oil for August delivery closed sharply higher on Friday gaining $7.27 to settle at $84.96 a barrel, above the 20 day moving average crossing at 82.52 confirming that a short term low has been posted. The high range close sets the stage for a steady to higher opening when Sunday's night session begins.

Stochastics and the RSI are oversold but are turning bullish signaling that sideways to higher prices are possible near term. If August renews this spring's decline, the 75% retracement level of the 2011-2012 rally crossing at 73.28 is the next downside target.

First resistance is the reaction high crossing at 87.32. Second resistance is the reaction high crossing at 92.52. First support is Thursday's low crossing at 77.28. Second support is the 75% retracement level of the 2011-2012 rally crossing at 73.28.

European leaders attending a two day summit agreed early Friday on a plan to use bailout funds to directly aid banks in Spain and Italy. The move in crude oil futures came as investors cheered the plan to help the euro zone's struggling banks.

The move, along with plans to bring Europe closer together, led to a surge in the euro, equities and commodities markets. The euro recently traded at $1.2684, up 1.9% from $1.2444 on Thursday. The Dow Jones Industrial Average recently traded 1.5% higher at 12,789.

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Crude Oil Spikes as Euro Leaders Relax Spains Debt Conditions

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CME: August crude oil prices traded sharply higher during the early morning hours, helped by an EU agreement aimed at relaxing borrowing costs in Spain and Italy. Risk assets across the globe appeared to embrace an agreement, and that has fostered ideas that global oil demand could turn higher. In addition to easing concerns over the European debt debacle, the crude oil market has also drafted support from tightening North Sea supply concerns.

COT: Crude oil was higher due to short covering overnight as it consolidates around the 62% retracement level of the 2009-2012 rally crossing at 80.33. Stochastics and the RSI are oversold and are turning neutral to bullish hinting that a short term low might be in or is near. Closes above the 20 day moving average crossing at 82.31 are needed to confirm that a short term low has been posted. If August extends this year's decline, the 75% retracement level of the 2009-2011 rally crossing at 73.28 is the next downside target. First resistance is the 20 day moving average crossing at 82.31. Second resistance is the reaction high crossing at 87.32. First support is Thursday's low crossing at 77.28. Second support is the 75% retracement level of the 2009-2011 rally crossing at 73.28.

Bloomberg: Crude posted its steepest intraday gain in eight months, increasing as much as 4.5 percent and trimming the biggest quarterly decline since the final three months of 2008. Oil gained after euro area leaders agreed to relax conditions on emergency loans for Spanish banks and possible help for Italy. Prices may advance after the European Union’s ban on the purchase, transport, financing and insurance of Iranian crude starts on July 1, a Bloomberg survey showed. Norway’s first industrywide energy strike since 2004 is in its sixth day.

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Annual Energy Outlook 2012.....Three Cases for the Future of World Oil Prices

The Annual Energy Outlook 2012 (AEO2012) presents three alternative paths for world oil prices based on different production and economic assumptions. Among these cases, the real (constant 2010 dollars) oil price in 2035 ranges from $62 per barrel in the Low Oil Price case to $200 per barrel in the High Oil Price case, with the Reference case at $145 per barrel.

The oil price in AEO2012 is defined as the average price of light, low-sulfur crude oil delivered to Cushing, Oklahoma, which is similar to the price for light, sweet crude oil traded on the New York Mercantile Exchange (West Texas Intermediate, or WTI).



Factors considered in AEO2012 that affect supply, demand, and prices for petroleum in the long term are:

* World demand for petroleum and other liquids

* Organization of the Petroleum Exporting Countries (OPEC) investment and production decisions

* The economics of non OPEC petroleum supply

* The economics of other liquids supply

The Reference case of AEO2012 indicates a short term increase in oil price, returning to price parity with the Brent oil price by 2016, as current constraints on pipeline capacity between Cushing and the Gulf of Mexico are moderated.

The Low Oil Price case results in a projected oil price of $62 per barrel in 2035. The Low Oil Price case assumes that economic growth and demand for petroleum and other liquids in developing economies (which account for nearly all of the projected growth in world oil consumption in the Reference case) is reduced.

Specifically, the annual gross domestic product (GDP) growth for the world, excluding the mature market economies that are members of the Organization for Economic Cooperation and Development (OECD), is assumed to be 1.5 percentage points lower than that of the Reference case in 2035 (only a 3.5% annual increase from 2010 to 2035), which reduces their projected oil consumption in 2035 by 8 million barrels from the Reference case projection.

While non OECD oil consumption is more responsive to lower economic growth than to prices, oil use in the OECD region increases modestly in the Low Oil Price case. In this lower price case, the market power of OPEC producers is weakened, and they lose the ability to control prices and to limit production.

In contrast, the High Oil Price case assumes prices rise to $186 per barrel by 2017 (in 2010 dollars) and then increase to $200 per barrel by 2035. These higher prices result from higher demand for petroleum and other liquid fuels in non OECD regions than projected for the Reference case. In particular, the projected GDP growth rates for China and India are 1.0 percentage point higher in 2012 and 0.3 points higher in 2035 than the rates in the Reference Case.

Overall, in 2035 it is projected that 4 million barrels per day will be produced above the Reference Case level, even though projected oil consumption in the mature, industrialized economies is reduced.

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Crude Oil Bulls Reeling From Lowest Close in 9 Months

Crude oil is bouncing back in Thursday evenings session from the lowest close in more then 9 months. But still trading well below strong resistance above the $80 level as European Union actions against Iran and a strike in Norway still prove unable to push crude through resistance. But the bulls hold out hope.

Crude oil closed lower on Thursday renewing this spring's decline. The low range close sets the stage for a steady to lower opening when Friday's night session begins. Stochastics and the RSI are oversold but are neutral to bearish signaling that sideways to lower prices are possible near term. If August extends this spring's decline, the 75% retracement level of the 2011-2012 rally crossing at 73.28 is the next downside target. Closes above the 20 day moving average crossing at 82.47 are needed to confirm that a low has been posted. First resistance is the 20 day moving average crossing at 82.47. Second resistance is the reaction high crossing at 87.32. First support is today's low crossing at 77.28. Second support is the 75% retracement level of the 2011-2012 rally crossing at 73.28.

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Natural gas closed lower on Thursday as it consolidated some of this month's rally. The mid range close sets the stage for a steady opening on Friday. Stochastics and the RSI are overbought are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term. If July extends this month's rally, February's high crossing at 3.137 is the next upside target. Multiple closes below the 20 day moving average crossing at 2.524 are needed to confirm that a short term top has been posted. First resistance is Wednesday's high crossing at 2.975. Second resistance is February's high crossing at 3.137. First support is the 10 day moving average crossing at 2.667. Second support is the 20 day moving average crossing at 2.524.

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Gold closed lower on Thursday renewing the decline off this month's high. The low range close sets the stage for a steady to lower opening when this evenings session begins trading. Stochastics and the RSI are neutral to bearish signaling that sideways to lower prices are possible near term. If August extends last week's decline, May's low crossing at 1529.30 is the next downside target. Closes above the 20 day moving average crossing at 1601.90 are needed to temper the bearish outlook. First resistance is the 20 day moving average crossing at 1601.90. Second resistance is reaction high crossing at 1642.40. First support is the reaction low crossing at 1556.40. Second support is May's low crossing at 1529.30.

Using Standard Deviation & Probability to Trade Options

From guest blogger J.W. Jones.....

I recently discussed the ability to use implied volatility to calculate the probability of a successful outcome for any given option trade. To review briefly, the essential concepts a trader must understand in order to make use of this helpful metric include......

The prices of any given underlying can be considered to be distributed in a Gaussian distribution the classic bell shaped curve.

The width of the spread of these prices is reflected in the standard deviation of the individual underlying’s distribution curve.

Plus / minus one standard deviation from the mean will include 68% of the individual price points, two standard deviations will include 95%, and three standard deviations will include 99.7%

A specific numerical value for the annual standard deviation can be calculated using the implied volatility of the options using the formula: underlying price X implied volatility

This standard deviation can be adjusted for the specific time period under consideration by multiplying the value derived above by the square root of the number of days divided by 365

These derived values are immensely important for the options trader because they give definitive metrics against which the probability of a successful trade can be gauged. An essential point of understanding is that the derived standard deviation gives no information whatsoever on the direction of a potential move. It merely determines the probability of the occurrence of a move of a specific magnitude.

Here's J.W.'s complete post and charts for "Using Standard Deviation & Probability to Trade Options"

Crude Oil Market Commentary for Thursday Morning June 28th

CME: August crude oil prices waffled between gains and losses throughout the initial morning hours, amid uncertainty ahead of the EU summit and slowing global growth prospects. The outside market tone provided a modest drag for the crude oil, with global equity markets weaker and slight gains in the US dollar. Additionally, slowing growth concerns have offset concerns that North Sea supplies have come under added strain from an oil worker strike in Norway. August crude oil prices climbed to a new four day high in response to yesterday's EIA data that showed an inventory decline of 133,000 barrels last week. EIA crude stocks are 27.697 million barrels above year ago levels and 41.847 million barrels above the five year average. Crude oil imports for the week stood at 9.118 million barrels per day compared to 9.445 million barrels the previous week. The refinery operating rate was up 0.7% to 92.6%, which compares to 88.1% last year and the five year average of 88.55%.

COT: Crude oil was slightly lower overnight as it consolidates around the 62% retracement level of the 2009-2012 rally crossing at 80.33. Stochastics and the RSI are oversold and are turning neutral to bullish hinting that a short term low might be in or is near. Closes above the 20 day moving average crossing at 82.56 are needed to confirm that a short term low has been posted. If August extends this year's decline, the 75% retracement level of the 2009-2011 rally crossing at 73.28 is the next downside target. First resistance is the 20 day moving average crossing at 82.56. Second resistance is the reaction high crossing at 87.32. First support is last Friday's low crossing at 77.56. Second support is the 75% retracement level of the 2009-2011 rally crossing at 73.28.

In other crude oil trading news.....

Venezuela wants OPEC to set an oil price band of $80 to $120 a barrel to stem crude's recent tumble, seeking to revive a policy the cartel scrapped seven years ago.

France is considering a one off tax on the oil sector before the end of 2012 that would raise around 500 million euros ($623.55 million), helping depleted French coffers but hurting its struggling refining industry.

Brazil's state led oil company Petrobras said on Wednesday that May output rose 1.9 percent to an average of 2.60 million barrels a day of oil and natural gas equivalent (boepd) as offshore fields in Brazil restarted after maintenance shutdowns.

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Commodities Get a Boost From New "It Isn't That Bad" Data in the U.S.

Crude oil closed higher due to short covering on Wednesday as it consolidates some of this spring's decline. The high range close sets the stage for a steady to higher opening when Thursday's night session begins. Stochastics and the RSI are oversold and are turning neutral to bullish signaling that a low might be in or is near. Closes above the 20 day moving average crossing at 82.92 are needed to confirm that a low has been posted. If August extends this spring's decline, the 75% retracement level of the 2011-2012 rally crossing at 73.28 is the next downside target. First resistance is the 20 day moving average crossing at 82.92. Second resistance is the reaction high crossing at 87.32. First support is last Friday's low crossing at 77.56. Second support is the 75% retracement level of the 2011-2012 rally crossing at 73.28.

Natural gas closed higher on Wednesday as it extended this month's rally. The low range close sets the stage for a steady to lower opening on Thursday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term. If July extends this month's rally, February's high crossing at 3.104 is the next upside target. Multiple closes below the 20 day moving average crossing at 2.446 are needed to confirm that a short term top has been posted. First resistance is today's high crossing at 2.946. Second resistance is February's high crossing at 3.104. First support is the 10 day moving average crossing at 2.610. Second support is the 20 day moving average crossing at 2.466.

Gold closed higher on Wednesday and the high range close sets the stage for a steady to higher opening when Thursday's night session begins trading. Stochastics and the RSI are neutral to bearish signaling that sideways to lower prices are possible near term. If August extends last week's decline, May's low crossing at 1529.30 is the next downside target. Closes above the 20 day moving average crossing at 1602.30 are needed to temper the bearish outlook. First resistance is the 20 day moving average crossing at 1602.30. Second resistance is reaction high crossing at 1642.40. First support is the reaction low crossing at 1556.40. Second support is May's low crossing at 1529.30.

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SABIC and ExxonMobil to Proceed with Specialty Elastomers Project at Al-Jubail

Saudi Basic Industries Corporation (SABIC) and affiliates of ExxonMobil announced today they will construct a world scale specialty elastomers facility at the Al-Jubail Petrochemical Company (Kemya) manufacturing joint venture.

The facility will be integrated with the existing Jubail complex and is expected to be completed in 2015. The companies have approved the next stage of project development, engineering, procurement and construction (EPC).

The facility will have the capacity to produce up to 400,000 tonnes per year of rubber. Including halobutyl, styrene butadiene, polybutadiene, and ethylene propylene diene monomer (EPDM) rubbers, thermoplastic specialty polymers, and carbon black to serve local markets, the Middle East and Asia. Kemya has awarded the EPC contract for the elastomers facility to Technip, Tecnicas Reunidas and Daelim.

Kemya is a 50-50 joint venture between SABIC and Exxon Chemical Arabia Inc., an affiliate of ExxonMobil Chemical Company. The two companies have collaborated closely since 1980 when they established the joint venture, which produces polyethylene, ethylene, and propylene. The new synthetic rubber project represents a significant broadening of Kemya’s product portfolio.

Find out more about this venture at ExxonMobils Newsroom.

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National Oilwell Varco Completes Wilson Acquisition

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National Oilwell Varco, Inc. (NYSE:NOV) announced the closing of its previously announced acquisition of Wilson distribution business segment from Schlumberger Limited (NYSE:SLB). Wilson is a leading distributor of pipe, valves and fittings as well as mill, tool and safety products and services.

Pete Miller, Chairman, President and CEO of National Oilwell Varco, stated “We are happy to welcome Wilson’s employees to the National Oilwell Varco family and look forward to continuing the excellent service and products NOV and Wilson have to offer our customers.”

National Oilwell Varco is a worldwide leader in the design, manufacture and sale of equipment and components used in oil and gas drilling and production operations, the provision of oilfield services, and supply chain integration services to the upstream oil and gas industry.

Statements made in this press release that are forward-looking in nature are intended to be "forward looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934 and may involve risks and uncertainties. These statements may differ materially from actual future events or results. Readers are referred to documents filed by National Oilwell Varco with the Securities and Exchange Commission, including the Annual Report on Form 10-K, which identify significant risk factors which could cause actual results to differ from those contained in the forward looking statements.

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Crude Oil Traders Whisper....U.S. Inventories on the Rise

CME: August crude oil prices trended lower throughout the overnight and initial morning hours. Traders noted that some of the late day advance yesterday was tempered by private industry data that suggesting that U.S. crude stocks might have unexpectedly increased last week. The market also appears to be under a degree of pressure in front of this week's EU summit, which is largely expected to show little progress in resolving the European debt crisis. The crude oil market garnered support in yesterday's session from mounting concerns over a tightening North Sea supply situation.

COT: August crude oil was slightly lower overnight as it consolidates below the 62% retracement level of the 2009-2012 rally crossing at 80.33. Stochastics and the RSI are oversold but remain neutral to bearish signaling that additional weakness is possible near term. If August extends this year's decline, the 75% retracement level of the 2009-2011 rally crossing at 73.28 is the next downside target. Closes above the 20 day moving average crossing at 82.86 are needed to confirm that a short term low has been posted. First resistance is the 20 day moving average crossing at 82.86. Second resistance is the reaction high crossing at 87.32. First support is last Friday's low crossing at 77.56. Second support is the 75% retracement level of the 2009-2011 rally crossing at 73.28.

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Strong Resistance at 80.33 Proving Difficult for the Crude Oil Bulls

Crude oil closed higher due to short covering on Tuesday as it consolidates below the 62% retracement level of the 2011-2012 rally crossing at 80.33. The high range close sets the stage for a steady to higher opening when Wednesday's night session begins. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If August extends this spring's decline, the 75% retracement level of the 2011-2012 rally crossing at 73.28 is the next downside target. Closes above the 20 day moving average crossing at 83.31 are needed to confirm that a low has been posted. First resistance is the 20 day moving average crossing at 83.31. Second resistance is the reaction high crossing at 87.32. First support is last Friday's low crossing at 77.56. Second support is the 75% retracement level of the 2011-2012 rally crossing at 73.28.

Natural gas closed higher on Tuesday as it extended this month's rally. The high range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI are becoming overbought but remain bullish signaling that sideways to higher prices are possible near term. If July extends this month's rally, May's high crossing at 2.838 is the next upside target. Multiple closes below the 20 day moving average crossing at 2.449 are needed to confirm that a short term top has been posted. First resistance is today's high crossing at 2.778. Second resistance is May's high crossing at 2.838. First support is the 20 day moving average crossing at 2.449. Second support is this month's low crossing at 2.168.

Gold closed lower on Tuesday and poised to renew the decline off last week's high. The low range close sets the stage for a steady to lower opening when Wednesday's night session begins trading. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term. If August extends last week's decline, May's low crossing at 1529.30 is the next downside target. Closes above the 10 day moving average crossing at 1602.60 are needed to temper the bearish outlook. First resistance is the 10 day moving average crossing at 1602.60. Second resistance is reaction high crossing at 1642.40. First support is the reaction low crossing at 1556.40. Second support is May's low crossing at 1529.30.

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CME Recap Energy Market Report For Tuesday June 26th

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August crude oil prices registered an inside day trading range that was slightly higher on the session. The market spent most of the session within a tight trading range, despite fractional improvement in outside market sentiment.

Early support for the market came from gains in Brent crude oil and from expectations that US weekly crude stocks drew down last week. Prices took a negative turn in the wake of US economic data that showed Consumer Confidence falling by more than expected in June.

Some traders pointed to gains in Brent crude oil and concerns over a workers' strike in Norway that could tighten up near term supply as a force providing a late morning turnaround. As a result, the price differential between Brent and WTI crude oil increased by nearly $2.00 on the session.

Expectations for this week's EIA crude oil report are for a draw in the range of 750,000 to 1.0 million barrels.

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Drop in U.S. Gasoline Prices Reflects Decline in Crude Oil Costs

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Since reaching a recent peak of $3.94 per gallon on April 2, the average retail price U.S. drivers paid for gasoline has fallen for 12 weeks in a row to $3.44 per gallon, according to EIA's weekly motor fuel survey. The drop in gasoline prices largely reflects the decline in crude oil prices (see chart below), which have historically comprised the biggest part of the pump price.

The national average price for regular unleaded gasoline fell 50 cents per gallon over the 12-week period, while the spot prices for West Texas Intermediate (WTI) crude oil declined the equivalent of 63 cents per gallon and Brent crude oil fell the equivalent of 81 cents per gallon. WTI and Brent are among the world's leading oil pricing benchmarks.



If crude oil price changes are fully passed through to consumers, for every $1 per barrel change in crude oil prices, consumers could expect to see a 2.4-cent-per-gallon change in retail gasoline prices. However, EIA analysis indicates that generally about 50% of the crude oil price change is usually passed on to consumers at the pump within two weeks, and 80% is generally passed on within four weeks. Gasoline prices are also sensitive to conditions affecting particular regional markets, such as significant refinery outages on the West Coast this spring that led to higher prices in that area.

The price of crude oil accounts for about two thirds of the retail price of gasoline. Refining costs, distribution and marketing costs, and state and federal taxes make up the rest of the retail gasoline price. Pump prices vary by region, with some drivers paying more or less for gasoline than the national average depending on where they live (see chart below).



Concerns that a weak global economy will lead to reduced petroleum demand has contributed to lower crude oil prices. However, part of the reason retail gasoline prices have not dropped as much as crude oil prices is that U.S. gasoline demand has started to show some growth in recent months. During the first quarter of 2012, monthly EIA data shows U.S. gasoline demand was down about 1.4% from the first quarter of last year. However, since the gasoline price peak, weekly EIA data indicate that gasoline demand has started to strengthen, with demand down only 0.9% in April compared to a year earlier and up by 0.2% in May.

The current 12 week drop in gasoline costs is the second longest period of declining pump prices recorded by EIA's weekly fuel price survey since the drop at the end of 2008, when pump prices fell for 15 straight weeks.

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Is this technical support for oil or a lift on tensions in Syria?

20 Survival Skills for the Crude Oil Trader

CME: August crude oil prices took a slightly higher track during the initial morning hours, helped by a modest lift in outside market sentiment and expectations that week's EIA inventory report will show a draw. August Brent crude oil broke out to a new three day high during the initial morning hours, supported by a modest level of short covering, as well as expectations that US crude oil inventories drew down last week. The crude oil market also appears to be getting a modest lift from rising tensions in Syria. Meanwhile, the supply situation looks more than ample given soft economic data that continues to weigh on demand prospects and as Saudi Arabia continues their active production pace.

COT: August crude oil was slightly higher overnight as it consolidates some of this year's decline. Stochastics and the RSI are oversold but remain neutral to bearish signaling that additional weakness is possible near term. If August extends this year's decline, the 75% retracement level of the 2009-2011 rally crossing at 73.28 is the next downside target. Closes above the 20 day moving average crossing at 83.31 are needed to confirm that a short term low has been posted. First resistance is the 20 day moving average crossing at 83.31. Second resistance is the reaction high crossing at 87.32. First support is last Friday's low crossing at 77.56. Second support is the 75% retracement level of the 2009-2011 rally crossing at 73.28.

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Crude Oil Bears Supported by Lack of Confidence in European Debt Crisis and China Numbers

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Crude oil closed lower on Monday as it consolidates below the 62% retracement level of the 2011-2012 rally crossing at 80.33. The mid range close sets the stage for a steady opening when Tuesday's night session begins. Stochastics and the RSI are diverging but are neutral to bearish signaling that sideways to lower prices are possible near term. If August extends this spring's decline, the 75% retracement level of the 2011-2012 rally crossing at 73.28 is the next downside target. Closes above the 20 day moving average crossing at 83.91 are needed to confirm that a low has been posted. First resistance is the 20 day moving average crossing at 83.91. Second resistance is the reaction high crossing at 87.32. First support is last Friday's low crossing at 77.56. Second support is the 75% retracement level of the 2011-2012 rally crossing at 73.28.

Natural gas closed higher on Monday as it extended this month's rally. The low range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI are neutral to bullish signaling that sideways to higher prices are possible near term. If July extends this month's rally, May's high crossing at 2.838 is the next upside target. Multiple closes below the 20 day moving average crossing at 2.434 are needed to confirm that a short term top has been posted. First resistance is today's high crossing at 2.731. Second resistance is May's high crossing at 2.838. First support is the 20 day moving average crossing at 2.434. Second support is this month's low crossing at 2.168.

Gold closed higher due to short covering on Monday as it consolidates some of this month's decline. The high range close sets the stage for a steady to higher opening when Tuesday's night session begins trading. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term. If August extends last week's decline, May's low crossing at 1529.30 is the next downside target. Closes above the 10 day moving average crossing at 1606.40 are needed to temper the bearish outlook. First resistance is the 10 day moving average crossing at 1606.40. Second resistance is reaction high crossing at 1642.40. First support is the reaction low crossing at 1556.40. Second support is May's low crossing at 1529.30.

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Crude Oil Opens Lower as Debby Loses Focus

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CME: August crude oil prices grinded higher during the Sunday evening trade but reversed course throughout the initial morning hours. It seemed that ongoing concerns over weakening global growth and European debt issues weighed on oil demand prospects. Fears over weakening demand took some of the focus away from Tropical Storm Debby in the Gulf of Mexico, which shuttered nearly 25% of oil and gas operations in the region. The Commitments of Traders Futures and Options report as of June 19th showed non commercial traders were net long 192,059 contracts, a decrease of 8,943. Non commercial and nonreportable traders combined held a net long position of 198,111 contracts, for a decrease of 15,830 in their net long positioning.

COT: August crude oil was lower overnight as it extends this year's decline. Stochastics and the RSI are oversold but remain bearish signaling that additional weakness is possible near term. If August extends this year's decline, the 75% retracement level of the 2009-2011 rally crossing at 73.28 is the next downside target. Closes above the 20 day moving average crossing at 83.89 are needed to confirm that a short term low has been posted. First resistance is the 20 day moving average crossing at 83.89. Second resistance is the reaction high crossing at 87.32. First support is last Friday's low crossing at 77.56. Second support is the 75% retracement level of the 2009-2011 rally crossing at 73.28.

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ONG: Crude Oil Weekly Technical Outlook Saturday June 23rd

Gold and Silver on the Verge of Something Spectacular

From the staff at ONG......

Crude oil's decline resumed last week and dropped to as low as 77.56 before recovering mildly. As long as 84.34 resistance holds, deeper fall is still expected for 74.95 key support next. Though, we'd start to look for reversal signal below there. Meanwhile, break of 84.34 will argue that a short term bottom is at least formed, with bullish convergence condition in 4 hours MACD. In such case, stronger rebound should be seen back to 90 psychological level.

In the bigger picture, price actions from 114.84 are developing into a three wave consolidation pattern with fall from 110.55 as the third leg. Deeper fall should eventually be seen to 74.95 low and possibly below. Though, we'd likely see strong support from 64.23 cluster level, 61.8% retracement of 33.20 to 114.83 at 64.38 and bring another medium term rise. Hence we'll look for reversal signal below 74.95.

In the long term picture, crude oil is in a long term consolidation pattern from 147.27, with first wave completed at 33.2. The corrective structure of the rise from 33.2 indicates that it's second wave of the consolidation pattern. While it could make another high above 114.83, we'd anticipate strong resistance ahead of 147.24 to bring reversal for the third leg of the consolidation pattern.

Nymex crude oil continuous contract 4 hour, daily, weekly and monthly charts

Gold Still at Risk of a Large Downward Move Before the Rally

North American Spot Crude Oil Benchmarks Likely Diverging Due to Bottlenecks

Gold and Silver on the Verge of Something Spectacular

West Texas Intermediate at Cushing, Oklahoma (WTI Cushing), a light, sweet crude grade, is North America's most closely observed crude oil price benchmark and the underlying commodity of the NYMEX crude futures contract. Until 2008, all North American crude grades broadly tracked fluctuations in WTI Cushing prices and were clustered within about $8 per barrel of the WTI Cushing price. Pricing differences between crude grades were largely explained by the different quality characteristics of the crude oil in each location and transportation costs to Cushing, the delivery point of the NYMEX contract.

Since 2008, however, the price differences between WTI Cushing and other North American crude oil benchmarks have increased sharply (see chart below). In addition to WTI, other crude grades have emerged as alternative benchmarks. In particular, the Argus Sour Crude Price Index (ASCI), a weighted average of prices for several offshore Gulf of Mexico sour crude grades, has become the benchmark or reference used for assessing the price of several imported grades sold on a long-term contract basis, including Saudi Arabian and Kuwaiti crude grades.



Transportation constraints in the wake of rising production from inland fields in Canada, North Dakota, and Texas are one of the main drivers of the growing price discrepancy between crude grades since 2008. Limited pipeline capacity has made it difficult to bring crude oil out of the center of the continent, lowering all the affected benchmarks compared to prices outside the area. But within the constrained area, prices have also diverged from each other, reflecting local transmission bottlenecks within the larger constrained area. For example, crude oil benchmarks for the Bakken, Western Canada, and West Texas Sour (Midland, Texas) have traded at a discount to WTI Cushing. Rising production in the Bakken and West Texas have exacerbated these price differences. Outside the constrained areas, benchmarks like Louisiana Light Sweet, Alaska North Slope, and Mars Blend in the Gulf of Mexico reflect premiums to WTI Cushing, sometimes significant.

The phrase "transportation constraints" refers to a broad range of logistic issues, with inadequate pipeline capacity being the most common issue. However, EIA is not aware of any crude oil production capacity being shut in because of a lack of capacity to move the oil. In the short term, production surges and/or pipeline shutdowns force oil producers to compete with each other for more expensive transport options: rail and then truck. In the longer term, additional transportation capacity (rail and pipeline) is likely to be built, which should lower the cost of transporting the oil to markets.

Some North American crude oil benchmark locations are identified in the map below.

Source: U.S. Energy Information Administration. 

Gold Still at Risk of a Large Downward Move Before the Rally

Gold Still at Risk of a Large Downward Move Before the Rally

Gold has been busy consolidating in what I believe will be a 13 Fibonacci month Primary wave 4 correction. The Gold bull market I’ve been following since 2001 is a likely 13 year bull cycle that will end in 2013 or 2014 depending on how you count. This current correction pattern is working off a 34 Fibonacci month rally that took Gold from 681 to 1923 at its ultimate highs. Last fall I warned about the parabolic run likely ending in the 1908 ranges and for investors to position themselves accordingly.

Today we have Gold trading around 1600 and our recent forecast in May was for a rally into Mid June topping around 1620-1650 ranges in US Dollars. The intermediate forecast still calls for a possible drop to 1445-1455 ranges this summer, the same figures I gave out on TheStreet.Com interview last September for a Primary wave 4 low.

Only a close and a strong move over 1650 will eliminate the downside risk in my opinion. Below we can see a weekly chart showing the 34 week moving average line as well as the obvious downtrend line. The 34 week moving average line acted as support during the Primary wave 3 rally from 681-1923. It now is acting as a resistance ceiling to break through, and I don’t think we will until this fall. The likely cyclical lows for this Gold correction will be in the October window and investors should make sure they are positioned long by that time.

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