CNBC's Sharon Epperson discusses the day's activity in the commodities markets and looks at where oil and precious metals are likely headed tomorrow.
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Tuesday, July 10, 2012
Monday, July 9, 2012
Crude Oil Declines as Norway Orders End to Strike
Crude oil dropped from the highest close in two days after Norway ended a strike by energy workers that had threatened to halt production by western Europe’s largest crude exporter.
Futures slipped as much as 1.1 percent in New York after the Norwegian government ordered compulsory arbitration in the dispute, preventing a lockout of platform workers that was scheduled to start at midnight yesterday. Norway pumped 1.63 million barrels of oil a day in May, or about 1.8 percent of global consumption, data from the Norwegian Petroleum Directorate show.
“Traders are probably taking the premium out of oil now that they think the strike will be settled,” said David Lennox, an analyst at Fat Prophets in Sydney. “It was looking like the strike was going to deteriorate further. That risk premium is certainly coming out of crude.”
Oil for August delivery fell as much as 98 cents to $85.01 a barrel in electronic trading on the New York Mercantile Exchange and was at $85.15 at 11:05 a.m. Sydney time. The contract climbed 1.8 percent yesterday to $85.99, the highest close since July 5. Prices are 14 percent lower this year.
Read the entire Bloomberg article
CME Crude Oil, Natural Gas and Gold Market Recap
August crude oil prices trended higher throughout the US trading session, supported by the lack of progress in resolving an oil workers strike in Norway. Another source of support for the crude oil market came from weakness in the US dollar and ideas that weaker than expected global economic data could prompt central bankers to pursue more monetary stimulus. The product markets were also higher, supported by gains in crude oil and prospect that leaders in China could move to lower domestic gasoline and diesel prices in a maneuver to stoke economic growth.
So far the natural gas futures market has recovered about 2/3 of the loss from Friday's session as the market rethinks the impact on demand from the hot weather in the US even as the economics of coal to gas switching are still biased to the coal side. At the moment the macroeconomics comparing the spot Nymex Appalachian coal price to the spot Nymex Nat Gas price is favorable to the coal side. This coupled with the robust level of coal inventories at many utility sites should result in the utility sector starting to switch back to coal at the expense of Nat Gas for power generation. This is certain to have an impact on demand and will eventually have a negative impact on the underperformance of injections that has been experienced throughout the injection season so far.
On the other hand the massive heat wave that has engulfed a major portion of the US for the last several weeks is cooling down in the south for the next 6 to 10 days. However, the above normal temperatures are projected to return during the 8 to 14 day forecast period. As such Nat Gas cooling demand will likely be above normal for most of the month of July and possibly beyond that. However, the big question is ...will the above normal level of cooling related Nat Gas demand be enough to compensate for the loss of demand from switching back to coal for power generation. I do not think it will be enough and as such I still view the current level of Nat Gas futures prices to be overvalued or better said ahead of the price level that the current fundamentals would support.
Perhaps the gold market was lifted by soaring grain prices or perhaps the gold trade was simply inspired by a revival of easing prospects from the Chinese. It is also possible that gold and other physical commodity markets were lifted as a result of calls to extend the Bush tax cuts for lower incomes. It is also possible that gold saw its fortunes boosted by a bounce in the Euro, which at times was hopeful of some fresh maneuvering from EU officials.
So far the natural gas futures market has recovered about 2/3 of the loss from Friday's session as the market rethinks the impact on demand from the hot weather in the US even as the economics of coal to gas switching are still biased to the coal side. At the moment the macroeconomics comparing the spot Nymex Appalachian coal price to the spot Nymex Nat Gas price is favorable to the coal side. This coupled with the robust level of coal inventories at many utility sites should result in the utility sector starting to switch back to coal at the expense of Nat Gas for power generation. This is certain to have an impact on demand and will eventually have a negative impact on the underperformance of injections that has been experienced throughout the injection season so far.
On the other hand the massive heat wave that has engulfed a major portion of the US for the last several weeks is cooling down in the south for the next 6 to 10 days. However, the above normal temperatures are projected to return during the 8 to 14 day forecast period. As such Nat Gas cooling demand will likely be above normal for most of the month of July and possibly beyond that. However, the big question is ...will the above normal level of cooling related Nat Gas demand be enough to compensate for the loss of demand from switching back to coal for power generation. I do not think it will be enough and as such I still view the current level of Nat Gas futures prices to be overvalued or better said ahead of the price level that the current fundamentals would support.
Perhaps the gold market was lifted by soaring grain prices or perhaps the gold trade was simply inspired by a revival of easing prospects from the Chinese. It is also possible that gold and other physical commodity markets were lifted as a result of calls to extend the Bush tax cuts for lower incomes. It is also possible that gold saw its fortunes boosted by a bounce in the Euro, which at times was hopeful of some fresh maneuvering from EU officials.
Sunday, July 8, 2012
Here's Our "Accurate" Stock Market Predictions on the Next Major Move
The term Stock market predictions is a very controversial topic and does seem to give off a negative/non-credible overtone to most traders, investors and the general public. We all know you cannot predict the market with 100% certainty, but knowing that you can still predict the market more times than not if done correctly. Keep in mind that the term “market prediction” is also known as a market forecast or technical analysis outlook and is nothing more than a estimated guess of where the price for a specific investment is likely to move in the coming minutes, hours, days, weeks and even months.
Getting back on topic, this report clearly shows how the US dollar plays a dominant role in the price of other investments. Understanding how to read the Dollar Index will make you a better trader all around when trading stocks, ETF’s, options or futures.
SP500 Stock Market predictions – 10 Minute Chart:
These charts clearly show the inverse relationship between the stock market and the dollar index. Knowing how to read charts (candle sticks, chart patterns, volume etc…) is not enough to give you a winning edge. You must also understand inter-market analysis as all markets are linked together in some way and the dollar plays a major role in where stock prices will move next. Review the charts and comments below on how I came up with my stock market prediction and trade idea.
Gold Market Prediction – 10 Minute Charts
Gold is another investment which is directly affected by the price of the dollar. Review charts for more details.
Long Term Stock Market Forecast:
The weekly dollar chart is VERY IMPORTANT to watch as a short term trader and long term investor because trend changes in the dollar means you open positions will also likely change direction.
So, if we apply technical analysis to the dollar chart as seen below. You will notice we are able to create a market forecast and predict roughly where price is likely to move and how long it should take to get there. If the dollar can break above the red resistance level then we can expect a rally for 4 – 8 weeks and a price target around the 87-88 level.
If this is the case then stocks and commodities would likely do the inverse price action and move lower, sharply lower…
Stock Market Predictions & Gold Market Forecast Conclusion:
In short, the next weekly candle stick on the dollar chart could be a game changer for those who are long the overall stock market.
I will admit that the current market conditions are not easy to trade because of all the headline news rolling out of Europe each week along with economic data. And I feel as though we have been tip toeing through a mine field for the past 12+ months waiting for extremely negative news are extremely positive news to trigging a wave of buying or selling that will make our jaw drop, but it has yet to happen. Remember always use stops and don’t get over committed in a headline driven market.
If you would like to receive my free weekly analysis like this, be sure to opt-in to my list.
No End in Sight For Norways Oil Workers Strike
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Norway's oil strike looks no closer to ending, with a government mediator saying workers and employers are still "far apart" in a dispute over pay and pensions. The industry association, which includes Exxon Mobil (XOM) and BP (BP), has threatened to halt all output from Tuesday. The tactic is probably designed to force the government to halt the strike, as it has done in the past.
Negotiations failed for a third time today.
From Bloomberg News.....
Norway’s oil strike continued for a 15th day after talks supervised by a state mediator failed to reach a compromise that would prevent the dispute from escalating to include all of the country’s offshore oil and gas production.
“There are no new talks planned and we don’t know where we will go from here,” Kristin Bremer Nebben, a spokeswoman for the Norwegian Oil Industry Association, which represents employers including Statoil ASA (STL), BP Plc (BP/) and Exxon Mobil Corp. (XOM), said in a phone interview today.
6 Things Successful Traders Have in Common
Norway's oil strike looks no closer to ending, with a government mediator saying workers and employers are still "far apart" in a dispute over pay and pensions. The industry association, which includes Exxon Mobil (XOM) and BP (BP), has threatened to halt all output from Tuesday. The tactic is probably designed to force the government to halt the strike, as it has done in the past.
Negotiations failed for a third time today.
From Bloomberg News.....
Norway’s oil strike continued for a 15th day after talks supervised by a state mediator failed to reach a compromise that would prevent the dispute from escalating to include all of the country’s offshore oil and gas production.
“There are no new talks planned and we don’t know where we will go from here,” Kristin Bremer Nebben, a spokeswoman for the Norwegian Oil Industry Association, which represents employers including Statoil ASA (STL), BP Plc (BP/) and Exxon Mobil Corp. (XOM), said in a phone interview today.
6 Things Successful Traders Have in Common
Private Empire - Exxon Mobil And American Power
If you were expecting "Private Empire", the latest book by two time Pulitzer Prize winning author Steve Coll, to serve as a hit piece on Exxon Mobil (XOM) (and "big oil" in general) you'll be somewhat disappointed.
For anyone unfamiliar with his previous work, Steve Coll's earlier books include the highly recommended "Ghost Wars", arguably the definitive geopolitical account of the activities of the CIA and other national intelligence agencies in Afghanistan and Pakistan from the time of the Soviet invasion up to the eve of the 9-11. Ghost Wars won the Pulitzer Prize in 2004 for general non-fiction and was one of the books a newly elected President Barrack Obama was reported to be reading upon entering office.
Steve Coll describes in an interview with Charlie Rose what lead him to want to write Private Empire and how his original idea for the book was to tell a broader story about the oil industry in the style of Daniel Yergin's "The Prize". He soon realized, however, that he needed a central character and Exxon was for him the only logical choice.
Coll's portrait of Exxon begins in March 1989 with the Exxon Valdez oil spill in Prince William Sound, Alaska, an event which made the company the most reviled in the United Sates. The book's timeline spans the subsequent transformation of the company, which was led by CEO Lee "Iron Ass" Raymond, up through its present day stewardship by current CEO Rex Tillerson.
Along the way we learn a great deal about Exxon, including its somewhat peculiar cult like corporate culture, its blockbuster merger with Mobil, its controversial stance and efforts on global warning, the access it enjoyed to political leaders such as Vice President Dick Cheney, its somewhat misleading approach to reporting oil reserves, and the company's record setting financial success. The book in fact makes for a compelling business case study and students of business history, strategy and management will find much of interest.
Read The Polycapitalist entire review
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For anyone unfamiliar with his previous work, Steve Coll's earlier books include the highly recommended "Ghost Wars", arguably the definitive geopolitical account of the activities of the CIA and other national intelligence agencies in Afghanistan and Pakistan from the time of the Soviet invasion up to the eve of the 9-11. Ghost Wars won the Pulitzer Prize in 2004 for general non-fiction and was one of the books a newly elected President Barrack Obama was reported to be reading upon entering office.
Steve Coll describes in an interview with Charlie Rose what lead him to want to write Private Empire and how his original idea for the book was to tell a broader story about the oil industry in the style of Daniel Yergin's "The Prize". He soon realized, however, that he needed a central character and Exxon was for him the only logical choice.
Coll's portrait of Exxon begins in March 1989 with the Exxon Valdez oil spill in Prince William Sound, Alaska, an event which made the company the most reviled in the United Sates. The book's timeline spans the subsequent transformation of the company, which was led by CEO Lee "Iron Ass" Raymond, up through its present day stewardship by current CEO Rex Tillerson.
Along the way we learn a great deal about Exxon, including its somewhat peculiar cult like corporate culture, its blockbuster merger with Mobil, its controversial stance and efforts on global warning, the access it enjoyed to political leaders such as Vice President Dick Cheney, its somewhat misleading approach to reporting oil reserves, and the company's record setting financial success. The book in fact makes for a compelling business case study and students of business history, strategy and management will find much of interest.
Read The Polycapitalist entire review
Get our Free Trading Videos, Lessons and eBook today!
Friday, July 6, 2012
Crude Oil Distillation and the Definition of Refinery Capacity
A crude oil refinery is a group of industrial facilities that turns crude oil and other inputs into finished petroleum products. A refinery's capacity refers to the maximum amount of crude oil designed to flow into the distillation unit of a refinery, also known as the crude unit.
The diagram below presents a stylized version of the distillation process. Crude oil is made up of a mixture of hydrocarbons, and the distillation process aims to separate this crude oil into broad categories of its component hydrocarbons, or "fractions." Crude oil is first heated and then put into a distillation column, also known as a still, where different products boil off and are recovered at different temperatures.
Lighter products, such as butane and other liquid petroleum gases (LPG), gasoline blending components, and naphtha, are recovered at the lowest temperatures. Mid-range products include jet fuel, kerosene, and distillates (such as home heating oil and diesel fuel). The heaviest products such as residual fuel oil are recovered at temperatures sometimes over 1,000 degrees Fahrenheit.
The simplest refineries stop at this point. Although not shown in the simplified diagram above, most refineries in the United States reprocess the heavier fractions into lighter products to maximize the output of the most desirable products using more sophisticated refining equipment such as catalytic crackers, reformers, and cokers.
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The diagram below presents a stylized version of the distillation process. Crude oil is made up of a mixture of hydrocarbons, and the distillation process aims to separate this crude oil into broad categories of its component hydrocarbons, or "fractions." Crude oil is first heated and then put into a distillation column, also known as a still, where different products boil off and are recovered at different temperatures.
Source: U.S. Energy Information Administration.
Lighter products, such as butane and other liquid petroleum gases (LPG), gasoline blending components, and naphtha, are recovered at the lowest temperatures. Mid-range products include jet fuel, kerosene, and distillates (such as home heating oil and diesel fuel). The heaviest products such as residual fuel oil are recovered at temperatures sometimes over 1,000 degrees Fahrenheit.
The simplest refineries stop at this point. Although not shown in the simplified diagram above, most refineries in the United States reprocess the heavier fractions into lighter products to maximize the output of the most desirable products using more sophisticated refining equipment such as catalytic crackers, reformers, and cokers.
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CME Recap Energy Market Report For Friday July 6th
This morning's EIA natural gas storage report showed a smaller than expected weekly injection of 39 bcf. August natural gas garnered modest support in the moments following the report, but concerns that prices near the $3.00 level could reduce demand, relative to coal, pressured prices back below $2.80.
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A Shocking Bankers Coup in the Euro Crisis
On Friday, June 29th, German Chancellor Angela Merkel acquiesced to changes to a permanent Eurozone bailout fund—“before the ink was dry,” as critics complained. Besides easing the conditions under which bailouts would be given, the concessions included an agreement that funds intended for indebted governments could be funneled directly to stressed banks.
According to Gavin Hewitt, Europe editor for BBC News, the concessions mean that:
[T]he eurozone’s bailout fund (backed by taxpayers’ money) will be taking a stake in failed banks.
Risk has been increased. German taxpayers have increased their liabilities. In future a bank crash will no longer fall on the shoulders of national treasuries but on the European Stability Mechanism (ESM), a fund to which Germany contributes the most.
In the short term, these measures will ease pressure in the markets. However there is currently only 500bn euros assigned to the ESM. That may get swallowed up quickly and the markets may demand more. It is still unclear just how deep the holes in the eurozone’s banks are.
The ESM is now a permanent bailout fund for private banks, a sort of permanent “welfare for the rich.” There is no ceiling set on the obligations to be underwritten by the taxpayers, no room to negotiate, and no recourse in court. Its daunting provisions were summarized in a December 2011 youtube video originally posted in German, titled “The shocking truth of the pending EU collapse!”:
The treaty establishes a new intergovernmental organization to which we are required to transfer unlimited assets within seven days if it so requests, an organization that can sue us but is immune from all forms of prosecution and whose managers enjoy the same immunity. There are no independent reviewers and no existing laws apply. Governments cannot take action against it. Europe’s national budgets [are] in the hands of one single unelected intergovernmental organization.
Here is the text of some of the ESM’s provisions
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Norway's Statoil is preparing to shut down production on the Norwegian Continental Shelf (NCS) following a notice of lockout from the Norwegian Oil Industry Association (OLF), the company said Thursday in a statement.
A lockout means a complete shutdown of Norwegian oil and gas production, highly possible government intervention and an end to the strike, which is now running into 12 days.
The decision made by the OLF affects all 6,515 members of Industry Energy, the Organisation of Energy Personnel (SAFE) and the Norwegian Organisation of Managers and Executives (Lederne) who are covered by the offshore pay agreements.
"The conflict is deadlocked and the demands are unreasonable," chief negotiator of the OLF Jan Hodneland said in a statement.
The announced lockout will start on July 9, 2012 at 2400 local time (2200 GMT), and all production on the NCS will be halted, Statoil said.
"Statoil is planning a controlled shutdown of production and return of personnel to land from July 9, 2012 at 2400 [local time]. It will take one to four days to shut all production on the NCS, depending on the characteristics and complexity of each field," Statoil added.
The shutdown on the NCS means that Statoil will have to grapple with a production shortfall of 1.2 million barrels of oil equivalent per day. The group's lost revenue resulting from the production stoppage will amount to around $87 million (NOK 520 million) per day, up an eye-popping $57 million (NOK 340 million) from the OLF's earlier estimate on June 27, 2012.
The striking workers are demanding for an early retirement age for offshore workers at 62 but the OLF has argued that their demands are not in line with government reforms.
"The strike could be a short-term factor supporting Brent prices, but not in the long-term as there are ample crude supplies," IHS Pruvin & Gertz managing director Victor Shum told Rigzone.
The NCS contains 70 oil and gas producing fields sited on the following blocks: The North Sea 56, The Norwegian Sea 13 and The Barents Sea 1. Among the affected fields is the Oseberg field which is critical in the oil market as crude produced from it forms part of the Brent Index. The index represents the average price of trading in the 21-day BFOE (Brent Blend, Forties, Oseberg, Ekofisk) market in the relevant delivery month as reported by industry media.
Posted courtesy of Rigzone.Com
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