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Tuesday, July 3, 2012
Adams video update "As we start Q3 is a global slowdown in the cards"
Now, let’s analyze the major markets and stocks on the move using MarketClub’s Trade Triangle Technology.....Click Here to view today’s video
Monday, July 2, 2012
CME: Natural Gas Prices Holding at Upper End of Trading Range
Natural Gas prices are continuing to trade around the upper end of the trading range on lighter than normal volume (likely related to the holiday this week in the US) as the very hot weather across major portions of the US results in a larger than normal call on Nat Gas for power related cooling demand versus the possible loss of Nat Gas demand as the economics of coal to gas switching continues to fade at current price levels. The economics of coal to gas switching are hovering around the unchanged level between coal and Nat Gas and at a level where utilities could begin to move back to coal in light of the overstocked coal inventory situation at many utility facilities.....Read the entire article.
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CME: Crude Oil Prices Remain Firm
Crude oil and most risk asset markets drifted a tad lower after last Friday's meteoritic short covering rally on the back of the EU Ministers deal. The deal details are still not available and there are some indications from Finland (according to a report in Reuters) that the deal could be fraying. I am not sure that will be the case so early after the deal had been put together but these kind of rumors and comments are likely to emerge over the next several weeks as the technocrats begin the process of working out the details of the deal. As such the markets will be reacting accordingly to any indications that the deal is changing especially after the large rally on Friday.....Read the entire article.
Dennis Gartman: Sell into Strength, Crude Oil Rally Won’t Last
Energy bulls prepare for disappointment. Commodities pro Dennis Gartman doesn’t think any rally in oil will be sustainable.
“I don’t see how an advance can be sustainable,” says Gartman. “The amount of oil [CLCV1 84.46 0.71 (+0.85%)] coming onto the market - is overwhelming.”
First and foremost Gartman believes Saudi Arabia intends to keep the world well supplied because they want to keep prices low and squeeze Iran, which is more susceptible to lower oil. (Saudi Arabia and Iran are longtime rivals with Tehran openly challenging the legitimacy of the royal House of Saud.)
First and foremost Gartman believes Saudi Arabia intends to keep the world well supplied because they want to keep prices low and squeeze Iran, which is more susceptible to lower oil. (Saudi Arabia and Iran are longtime rivals with Tehran openly challenging the legitimacy of the royal House of Saud.)
| ||
But that's not the only negative catalyst for oil.
In addition, Gartman believes the market will be well supplied due to discoveries made right here in the US such as the massive discovery in North Dakota’s Bakken Shale.
And Gartman thinks the abundance of nat gas in the US is negative for oil because trucking companies have a strong incentive to convert their fleet to alternative energy.
All told, “I can see the rally in oil lasting another $2-$3 dollars but any bounce should be sold,” he says. “At the end of the day, I’d be a seller."
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Crude Oil Bulls Struggle to Hold 20 Day Moving Average
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Crude oil fell on Monday as the Institute for Supply Management’s U.S. factory index dropped 1.4 percent and collective Euro unemployment hit historic highs never seen in history.
Crude oil posted an inside day with a lower close on Monday as it consolidated some of last Friday's rally but remains above the 20 day moving average crossing at 82.49. The mid range close sets the stage for a steady opening when Tuesday's night session begins. Stochastics and the RSI are turning bullish signaling that sideways to higher prices are possible near term. If August extends last Friday's rally, the 38% retracement level of this year's decline crossing at 90.43 is the next upside target. If August renews this year'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 38% retracement level of this year's decline crossing at 90.43. First support is last Thursday's low crossing at 77.28. Second support is the 75% retracement level of the 2011-2012 rally crossing at 73.28.
John Kilduff, trader with Again Capital, said a weak jobs report this Friday could spur additional selling. But he doesn't see much chance of oil slipping into the $60s, as some had been discussing prior to Friday. "It's only a draft," said Tony Rosado, an oil options analyst and broker at GA Global Markets. But if Iran takes more concrete action in the strait, an important waterway for oil, "then I think people will have to take it more seriously," Mr. Rosado added.
Natural gas closed higher on Monday and is poised to extend the rally off June's low. The high range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI have turned bearish hinting that a short term top might be in or is near. Multiple closes below the 20 day moving average crossing at 2.564 are needed to confirm that a short term top
has been posted. If July extends the rally off June's low, February's high crossing at 3.137 is the next upside target. First resistance is last 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 2.714. Second support is the 20 day moving average crossing at 2.564.
Gold posted an inside day with a lower close on Monday. 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 turning bullish signaling that sideways to higher prices are possible near term. Multiple closes above the 20 day moving average crossing at 1600.10 are needed to temper the bearish outlook. If August renews the decline off June's high, May's low crossing at 1529.30 is the next downside target. First resistance is the 20 day moving average crossing at 1600.10. 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 fell on Monday as the Institute for Supply Management’s U.S. factory index dropped 1.4 percent and collective Euro unemployment hit historic highs never seen in history.
Crude oil posted an inside day with a lower close on Monday as it consolidated some of last Friday's rally but remains above the 20 day moving average crossing at 82.49. The mid range close sets the stage for a steady opening when Tuesday's night session begins. Stochastics and the RSI are turning bullish signaling that sideways to higher prices are possible near term. If August extends last Friday's rally, the 38% retracement level of this year's decline crossing at 90.43 is the next upside target. If August renews this year'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 38% retracement level of this year's decline crossing at 90.43. First support is last Thursday's low crossing at 77.28. Second support is the 75% retracement level of the 2011-2012 rally crossing at 73.28.
John Kilduff, trader with Again Capital, said a weak jobs report this Friday could spur additional selling. But he doesn't see much chance of oil slipping into the $60s, as some had been discussing prior to Friday. "It's only a draft," said Tony Rosado, an oil options analyst and broker at GA Global Markets. But if Iran takes more concrete action in the strait, an important waterway for oil, "then I think people will have to take it more seriously," Mr. Rosado added.
Natural gas closed higher on Monday and is poised to extend the rally off June's low. The high range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI have turned bearish hinting that a short term top might be in or is near. Multiple closes below the 20 day moving average crossing at 2.564 are needed to confirm that a short term top
has been posted. If July extends the rally off June's low, February's high crossing at 3.137 is the next upside target. First resistance is last 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 2.714. Second support is the 20 day moving average crossing at 2.564.
Gold posted an inside day with a lower close on Monday. 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 turning bullish signaling that sideways to higher prices are possible near term. Multiple closes above the 20 day moving average crossing at 1600.10 are needed to temper the bearish outlook. If August renews the decline off June's high, May's low crossing at 1529.30 is the next downside target. First resistance is the 20 day moving average crossing at 1600.10. 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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Oil Traders Keeping an Eye on Iran
Are you ready for this weeks move?
CNBC's Sharon Epperson on oil price action in the day ahead, with an outlook on EU sanctions against Iran and tomorrow's meeting with Western countries about its nuclear program.
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CNBC's Sharon Epperson on oil price action in the day ahead, with an outlook on EU sanctions against Iran and tomorrow's meeting with Western countries about its nuclear program.
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Obviously, the Crude Oil Markets Overreacted Last Week
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CME: August crude oil prices traded lower during the overnight and early morning hours, as they corrected Friday's more than 9.0% gain. Some traders suggested that sluggish China and European manufacturing data served to tamp down global oil demand prospects and pressured crude oil prices lower. Meanwhile, there were a couple of positives in the crude oil market that might have limited early morning losses, including a European embargo on Iranian oil that went into effect over the weekend and the ongoing oil workers strike in Norway. The Commitments of Traders Futures and Options report as of June 26th showed non-commercial traders were net long 178,866 contracts, a decrease of 13,193. Non-commercial and nonreportable traders combined held a net long position of 192,382 contracts, for a decrease of 5,729 in their net long position.
COT: August crude oil was lower overnight as it consolidated some of last Friday's rally but remains above the 20 day moving average crossing at 82.49. Stochastics and the RSI have turned bullish signaling that sideways to higher prices are possible near term. If August extends the rally off June's low, the reaction high crossing at 87.32 is the next upside target. If August renews 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 reaction high crossing at 87.32. Second resistance is the reaction high crossing at 92.52. First support is last Thursday's low crossing at 77.28. Second support is the 75% retracement level of the 2009-2011 rally crossing at 73.28.
“The economic data doesn’t seem to suggest oil demand is going to be very explosive, and the demand expectation is softening,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “The market realized that maybe people overreacted last week and we are pulling back to a more normal area.”
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CME: August crude oil prices traded lower during the overnight and early morning hours, as they corrected Friday's more than 9.0% gain. Some traders suggested that sluggish China and European manufacturing data served to tamp down global oil demand prospects and pressured crude oil prices lower. Meanwhile, there were a couple of positives in the crude oil market that might have limited early morning losses, including a European embargo on Iranian oil that went into effect over the weekend and the ongoing oil workers strike in Norway. The Commitments of Traders Futures and Options report as of June 26th showed non-commercial traders were net long 178,866 contracts, a decrease of 13,193. Non-commercial and nonreportable traders combined held a net long position of 192,382 contracts, for a decrease of 5,729 in their net long position.
COT: August crude oil was lower overnight as it consolidated some of last Friday's rally but remains above the 20 day moving average crossing at 82.49. Stochastics and the RSI have turned bullish signaling that sideways to higher prices are possible near term. If August extends the rally off June's low, the reaction high crossing at 87.32 is the next upside target. If August renews 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 reaction high crossing at 87.32. Second resistance is the reaction high crossing at 92.52. First support is last Thursday's low crossing at 77.28. Second support is the 75% retracement level of the 2009-2011 rally crossing at 73.28.
“The economic data doesn’t seem to suggest oil demand is going to be very explosive, and the demand expectation is softening,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “The market realized that maybe people overreacted last week and we are pulling back to a more normal area.”
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Sunday, July 1, 2012
EconMatters: Crude Oil....A Perfect Bear Storm Despite the Euro Pop
Crude oil prices, along with world stocks, surged on Friday after euro zone leaders reached an accord on directly recapitalizing regional banks as well as measures to cut soaring borrowing costs in Italy and Spain. Brent crude jumped more than 7% in one day to close at $97.80 a barrel, while WTI also settled up 9.36% to $84.96 a barrel on NYMEX. However, for the quarter, spot Brent and U.S. oil futures still fell 20.4% and 17.5% respectively, their steepest quarterly percentage drops since the fourth quarter of 2008 post financial crisis. Looking ahead, we believe this little 'Euro pop' will soon fizz out weighted down by the reality of basic market fundamental factor.
First of all, the Euro accord bandaid does not fundamentally change what's causing the current crisis to begin with, high sovereign debt, out of control government spending, and insolvent regional banks. Add to this scenario is a slowing of European demand, parts of Europe are in a recession, and this not only affects less oil being consumed in Europe, but backs all the way up the supply chain from Ford automobiles being sold and needing to be manufactured, to Chinese factories needing to ratchet manufacturing cycles down to account for less demand out of Europe.
Macroeconomics aside, the oil inventory picture in the U.S. is also quite interesting these days, to say the least. For example, On 1/27/2012 there was 338,942 Million Barrels in US storage facilities, then on 2/24/2012 it started slowly rising to 344,868 Million, then Inventory builds started accelerating as on 3/23/2012 there were 353,390 Million on hand, then we jumped dramatically to 375,864 Million Barrels on 4/27/2012, with another sizable increase to 384,740 on 5/25/2012, and on 6/22/2012 the number stands at 387,166 Million Barrels in US Storage facilities, way above the five-year range. (See Chart Below)
This is taking place despite the domestic refinery run rate has increased from 85% in January to 92% in the week ending June 22 (See Chart Below). As of June 1, 2012, crude oil inventories held at Cushing, OK were 47.8 million barrels, the highest level on record, according to the U.S. Energy Dept. These are historically high numbers, but the magnitude of the rise over what is generally the stronger part of the US business cycle each year is the more compelling story.
With record refinery runs, we still cannot make a dent in the oil Inventories, which implies that there is a lot of oil in the market. In fact, if this trend continues, even just for the next three months, we are going to shatter previous storage records here in the US. At current rate, the inventory number could smash through the 400 Million Barrel level over the next quarter.
This does not bode well for the oil market when the slow part of the year comes around in August and September, where Gasoline demand drops off rather sharply, and is usually the slowest part of the year in terms of fuel usage, demand, and prices typically drop significantly each year. Technically, WTI could easily blow below $70/b with no major support till $60/b comes this August/September, and prices would remain challenged in the short to medium term.
What are the reasons for this glut of oil in the US? There are several, China has slowed manufacturing and exports, i.e., their economy has pulled back considerably. India is having all sorts of credit worthiness concerns, and is also growing at a slower rate. So in short, the emerging market economies are using less oil.
The demand picture in the U.S. is also quite dismal. EIA data show in the first quarter, total U.S. liquid fuels consumption fell 3.7% YoY due to high prices and record warm weather. For the second half of 2012, and 2013, EIA expects a YoY increase of only 1.2% and 0.6% respectively in liquid fuels consumption.
Furthermore, there are more domestic oil production mostly from unconventional shale plays, as there are more Capex drilling projects started during the beginning half of the year on high oil price. This has also pulled a lot more independents into drilling, and we are producing more oil each day than we actually consume or need. This has been one major contributing factor in these continuous inventory builds during the strong part of the usage cycle, as refineries are operating at record utilization levels since the recovery with the seasonal spring/summer driving season going from March with Spring Break through basically labor day, (some say July 4th is the peak of the Summer driving season).
Internationally, the Libyan oil is back on line, and other oil producing countries pumping more oil out of the ground compared to the last 5 years during this era of elevated oil prices. The Saudis are producing at the high end of their range as well. In a recent report, U.S. EIA noted that global company held oil inventories in the major industrialized nations will be sufficient to cover 57.7 days of demand at the end of 2012, the highest level in 15 years.
Basic economics plays a role in this story as well. Just ask this one question--Where are the high margin business opportunities over the last 5 years? It sure isn`t in the Banking Industry with deal-making and large scale private equity deals falling off a cliff. It hasn`t been in the real estate market either.
Market dynamics 101 stipulates that high oil prices leads to higher margins, which leads to more investment resources being directed to this sector which ultimately rebalances the market, and oil prices come back down. This is why there is often a boom and bust cycle that plays out in many investment sectors, and historically the energy and oil sectors have been the poster kids to this rule.
So essentially, five years of really high prices--higher than the actual fundamentals of the economy should dictate--have caused an artificial market scenario where longer-term demand was being stifled by currency concerns, inflation concerns, while commodity investment in general has served as a case of over investment in this area in relation to true, actual Global demand.
Throw in the fact that it seems everybody (governments as well as consumers) is in debt, nobody has any money, credit issues are becoming increasingly burdensome to deficit financing to artificially stimulate growth via the government intervention route, all these factors are forming a perfect storm for the oil market to face some major headwinds for the next 5 years.
Posted courtesy of our friends at EconMatters.Com
First of all, the Euro accord bandaid does not fundamentally change what's causing the current crisis to begin with, high sovereign debt, out of control government spending, and insolvent regional banks. Add to this scenario is a slowing of European demand, parts of Europe are in a recession, and this not only affects less oil being consumed in Europe, but backs all the way up the supply chain from Ford automobiles being sold and needing to be manufactured, to Chinese factories needing to ratchet manufacturing cycles down to account for less demand out of Europe.
Macroeconomics aside, the oil inventory picture in the U.S. is also quite interesting these days, to say the least. For example, On 1/27/2012 there was 338,942 Million Barrels in US storage facilities, then on 2/24/2012 it started slowly rising to 344,868 Million, then Inventory builds started accelerating as on 3/23/2012 there were 353,390 Million on hand, then we jumped dramatically to 375,864 Million Barrels on 4/27/2012, with another sizable increase to 384,740 on 5/25/2012, and on 6/22/2012 the number stands at 387,166 Million Barrels in US Storage facilities, way above the five-year range. (See Chart Below)
 |
| Chart Source: EIA, June 27, 2012 |
This is taking place despite the domestic refinery run rate has increased from 85% in January to 92% in the week ending June 22 (See Chart Below). As of June 1, 2012, crude oil inventories held at Cushing, OK were 47.8 million barrels, the highest level on record, according to the U.S. Energy Dept. These are historically high numbers, but the magnitude of the rise over what is generally the stronger part of the US business cycle each year is the more compelling story.
 |
| Chart Data Source: EIA, as of June 22, 2012 |
With record refinery runs, we still cannot make a dent in the oil Inventories, which implies that there is a lot of oil in the market. In fact, if this trend continues, even just for the next three months, we are going to shatter previous storage records here in the US. At current rate, the inventory number could smash through the 400 Million Barrel level over the next quarter.
This does not bode well for the oil market when the slow part of the year comes around in August and September, where Gasoline demand drops off rather sharply, and is usually the slowest part of the year in terms of fuel usage, demand, and prices typically drop significantly each year. Technically, WTI could easily blow below $70/b with no major support till $60/b comes this August/September, and prices would remain challenged in the short to medium term.
What are the reasons for this glut of oil in the US? There are several, China has slowed manufacturing and exports, i.e., their economy has pulled back considerably. India is having all sorts of credit worthiness concerns, and is also growing at a slower rate. So in short, the emerging market economies are using less oil.
The demand picture in the U.S. is also quite dismal. EIA data show in the first quarter, total U.S. liquid fuels consumption fell 3.7% YoY due to high prices and record warm weather. For the second half of 2012, and 2013, EIA expects a YoY increase of only 1.2% and 0.6% respectively in liquid fuels consumption.
Furthermore, there are more domestic oil production mostly from unconventional shale plays, as there are more Capex drilling projects started during the beginning half of the year on high oil price. This has also pulled a lot more independents into drilling, and we are producing more oil each day than we actually consume or need. This has been one major contributing factor in these continuous inventory builds during the strong part of the usage cycle, as refineries are operating at record utilization levels since the recovery with the seasonal spring/summer driving season going from March with Spring Break through basically labor day, (some say July 4th is the peak of the Summer driving season).
Internationally, the Libyan oil is back on line, and other oil producing countries pumping more oil out of the ground compared to the last 5 years during this era of elevated oil prices. The Saudis are producing at the high end of their range as well. In a recent report, U.S. EIA noted that global company held oil inventories in the major industrialized nations will be sufficient to cover 57.7 days of demand at the end of 2012, the highest level in 15 years.
Basic economics plays a role in this story as well. Just ask this one question--Where are the high margin business opportunities over the last 5 years? It sure isn`t in the Banking Industry with deal-making and large scale private equity deals falling off a cliff. It hasn`t been in the real estate market either.
Market dynamics 101 stipulates that high oil prices leads to higher margins, which leads to more investment resources being directed to this sector which ultimately rebalances the market, and oil prices come back down. This is why there is often a boom and bust cycle that plays out in many investment sectors, and historically the energy and oil sectors have been the poster kids to this rule.
So essentially, five years of really high prices--higher than the actual fundamentals of the economy should dictate--have caused an artificial market scenario where longer-term demand was being stifled by currency concerns, inflation concerns, while commodity investment in general has served as a case of over investment in this area in relation to true, actual Global demand.
Throw in the fact that it seems everybody (governments as well as consumers) is in debt, nobody has any money, credit issues are becoming increasingly burdensome to deficit financing to artificially stimulate growth via the government intervention route, all these factors are forming a perfect storm for the oil market to face some major headwinds for the next 5 years.
Posted courtesy of our friends at EconMatters.Com
Saturday, June 30, 2012
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Friday, June 29, 2012
Crude oil appears to set a near term bottom
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
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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Thursday, June 28, 2012
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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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 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
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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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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Wednesday, June 27, 2012
Commodities Get a Boost From New "It Isn't That Bad" Data in the U.S.
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
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
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
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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Tuesday, June 26, 2012
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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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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