ONG: Crude Oil, Natural Gas and Gold Weekly Technical Outlook for Saturday Sept. 29th

Crude oil bulls took a beating this week and it didn't come as any surprise to us. The staff at Oil N'Gold has been calling this one spot on and we don't expect that to change any time soon. Here's what ONG sees coming this week along with their numbers to trade it......

Crude oil dropped to as low as 88.95 last week before recovering. Some consolidations could be seen initially this week but another fall will remain mildly in favor as long as 94.08 holds. Current fall from 100.42 would extend to 61.8% retracement of 77.28 to 100.42 at 86.12 and possibly below. Though, we'd expect strong support ahead of 77.28 to contain downside. Meanwhile, break of 94.08 will flip bias to the upside for a test on 100.42 resistance. After all, we'd expect another rise to 100.55 after completing the current consolidative price actions.

In the bigger picture, current development suggests that price actions from 114.83 are a triangle consolidation pattern. Fall from 100.42 is likely the fifth and the last leg of such consolidation. Having said that, downside should be contained above 77.28 and bring an upside breakout eventually. Break of 110.55 will strongly suggest that whole rebound from 33.29 has resumed for above 114.83.

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

Natural gas finally took out 3.277 resistance last week and the development confirmed that whole rebound from 1.902 has resumed. More importantly, the close above 3.255 has larger bullish implication. Further rally is now expected to target medium term channel resistance next (now at around 4.0.). On the downside, break of 55 days EMA (now at 2.91) is needed to signal near term reversal. Otherwise, outlook will stay bullish even in case of retreat.

In the bigger picture, the strong break of 55 weeks EMA, as well as the break of 3.255 support turned resistance indicates that medium term decline from 6.108 is completed at 1.902 already. It's bit early to confirm but bullish convergence condition in weekly MACD suggests that the down trend from 13.694 (2008 high) is possibly over too. Sustained break of the channel resistance (now at around 4.0) will set the stage for a test on 4.983 key resistance next. Meanwhile, break of 2.575 support will argue that the rebound from 1.902 is over and the medium larger down trend is still in progress for a new low.

In the longer term picture, decisive break of 3.255 resistance will be an important signal of long term bottoming reversal and could at least give a push to 4.983/6.108 resistance zone.

Nymex Natural Gas Continuous Contract 4 Hour, Daily, Weekly and Monthly Charts

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Gold consolidated below 1790 resistance last week. Despite a rally attempt, gold is still limited below this level. More sideway trading might be seen. But note that as long as 1720 minor support holds, current rise is still expected to continue. Decisive break of 1792.7/1804.4 resistance zone will have larger bullish implication and would pave the way to 1923.7 historical high. Though, break of 1720 will indicate near term reversal and will turn outlook bearish for 1674/1 support first.

In the bigger picture, price actions from 1923.7 high are viewed as a medium term consolidation pattern. There is no indication that such consolidation is finished, and more range trading could be seen. In any case, downside of any falling leg should be contained by 1478.3/1577.4 support zone and bring rebound. Meanwhile, break of 1792.7/1804.4 resistance zone will argue that the long term uptrend is possibly resuming for a new high above 1923.7.

In the long term picture, with 1478.3 support intact, there is no change in the long term bullish outlook in gold. While some more medium term consolidation cannot be ruled out, we'd anticipate an eventual break of 2000 psychological level in the long run

Comex Gold Continuous Contract 4 Hour, Daily, Weekly and Monthly Charts

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EIA "Natural Gas Monthly" for September 2012

The September Natural Gas Monthly, featuring data for July 2012, has been released. This issue features a new price series, natural gas liquid composite spot price, which combines natural gas liquid production from natural gas processing plants and daily spot prices of natural gas liquids from Mont Belvieu, Texas.

The Henry Hub natural gas spot price is also included. Natural gas used for electric power reached 1,088 billion cubic feet (Bcf) for July, leading to another monthly record for natural gas consumption of 2,045 Bcf, the highest July on record. Dry production for July stayed relatively stable for the fourth straight month at 2,024 Bcf or 65.3 Bcf per day.

Click here for the complete EIA natural gas summary

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Marshall Adkins Interview: The Case of the Missing 200 Million Barrels of Crude Oil

Supply threats in the Middle East have governments around the world hoarding oil, largely in secret. But it didn’t get past Raymond James Director for Energy Research Marshall Adkins, who noticed the 200 million barrel discrepancy between what was pumped and reported global oil reserves. Where did the missing oil go, and why don’t prices reflect this substantial surplus? More importantly, what happens once the reality of an oversupply sets in? A tough six months, Adkins expects. Read on to find out where you can hide when prices plummet.

The Energy Report: You’ve written a provocative research report titled “Hello, We’d Like to Report a Missing 200 Million Barrels of Crude.” It argues that the global oil inventory should have grown by over 200 million barrels (200 MMbbl) during the first six months of 2012. Where did this oil go? And a better question is, why hasn’t this surplus shown up in pricing?

Marshall Adkins: When the U.S., the European Union and the United Nations imposed sanctions against Iran, the world responded by putting oil into storage. China rapidly began filling its strategic petroleum reserves. Saudi Arabia topped off its surface reserves. Iran put oil in the floating tankers.

TER: Why isn’t this storage being reported? Is it normal for this oil to not go into the regular reporting channels?

MA: Yes. Unfortunately, it takes three or four months, and often six months, to get good data from the Organization for Economic Cooperation and Development (OECD). It’s a lag, but at least you usually get the data. We estimate that OECD data accounts for about two-thirds of global oil inventory capacity. The other third, which is just an estimate, is off the radar. Few sources really track this non-OECD data. The International Energy Agency (IEA) does not track it either, because there’s simply no reliable way of getting the information. China is probably the best example of that. It just does not tell us exactly how much it has.

TER: Could this result in dumping at some time in the future, potentially after the November election in the U.S.?

MA: It could. But even if they don’t dump it, we think there is an even bigger structural problem. We are running out of places to put the growing supply of oil. Based on our supply-demand numbers, the world is poised to build significant inventories in early 2013. There is a very real possibility that if Saudi Arabia does not initiate production cuts sometime in early 2013, we will run out of places to put this oil around the world.

TER: Your particular specialty area is oilfield services. You maintain a U.S. rig-count table, which showed a 6% drop year-to-date as of August 31, 2012. Does this indicate that it’s getting easier to get oil horizontally than it is to drill straight down?

MA: There is no question that the application of horizontal oil technology has completely changed the game for both oil and natural gas here in the U.S. Yes, it’s just a much more efficient way of extracting oil and gas, particularly from formations that are very tight. This is a trend that’s going to be here for a long time. It has led to an incredible increase in production per well.

TER: I noted dry gas rigs in your table are down 57% during that same one-year period. Even wet gas rigs are down 40%. How long can this go on before gas prices turn around?

MA: The decline in the overall rig count this year is mainly a function of the falling natural gas rig count, both wet and dry gas rigs. Early on, oil rig growth offset a lot of that gas decline, but the growth rate in oil has stagnated. So, low prices for natural gas are causing a meaningful decrease in gas drilling, but we think there will continue to be reasonable growth in gas supply from the oil wells in operation. That said, gas prices should gradually rebound as we build out infrastructure and consumers start to take greater advantage of extremely low gas prices in the U.S. Next year, we think the overall U.S. rig count will continue to deteriorate with lower oil prices. As that happens, overall gas production growth should flatten. That allows growing gas demand to offset stagnating supply growth. That should eventually drive U.S. natural gas prices higher. It will take a while, but we expect gas prices to improve steadily over the next several years.

TER: Natural gas prices were up about 3540% before summer. Was this just a bounce, or could this be the beginning of a bull market in natural gas?

MA: I wouldn’t call it a bull market in gas. Gas prices have certainly improved, but I think most people who are out there drilling for gas would say that $3 per thousand cubic feet ($3/Mcf) isn’t exactly a bull market. They simply aren’t making a whole lot of money at that price. That said, today’s prices are much better than six months ago and things are looking better. We think natural gas prices will average closer to $3.25/mcf next year and $4/Mcf the year after. Yes, we think the gas price bottom that we saw earlier this year, $2/Mcf, is well behind us. Directionally, things should continue to improve.

TER: Should investors be bullish on any segment in energy right now? If so, which ones?

MA: In light of our relatively bearish overall stance on crude, we don’t have any Strong Buy recommendations in our oil services universe. We’re not recommending a whole lot of exploration and production (EP) names at this stage either. The ones that we think do perform here are refiners that benefit from the price differential between West Texas Intermediate (WTI) and Brent crude. In addition, infrastructure companies such as master limited partnerships (MLPs) and companies that service either pipelines, refineries or other new infrastructure should outperform over the next several years.

TER: Any final thoughts?

MA: The bottom line is that we have a tough six months ahead of us for crude oil prices as inventories continue to build in Q1/13. Sometime in early 2013, oil prices should deteriorate as much as 30% from where we are today and hit bottom in mid-2013. At that point, we’ll probably get a lot more constructive on oil services and EP names.

TER: Thank you very much.

MA: Thank you for having me.

Marshall Adkins focuses on oilfield services and products, in addition to leading the Raymond James energy research team. He and his group have won a number of honors for stock-picking abilities over the past 15 years. Additionally, his group is well known for its deep insight into oil and gas fundamentals. Prior to joining Raymond James in 1995, Adkins spent 10 years in the oilfield services industry as a project manager, corporate financial analyst, sales manager, and engineer. He holds a Bachelor of Science degree in petroleum engineering and a Master of Business Administration from the University of Texas at Austin.

Posted courtesy of INO.Com's Traders Blog

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Brazilian Court Serves Transocean Injunction to Cease Operations

Transocean (NYSE:RIG) announced today that at approximately noon Rio De Janeiro time (11 a.m., ET), September 27, 2012, the federal court in Rio de Janeiro served the company with a preliminary injunction requiring that it cease operations in Brazil within 30 calendar days from the date of service.

The company is vigorously pursuing the overturn or suspension of the preliminary injunction, including through an appeal to the Superior Court of Justice. Absent relief from the courts, Transocean will be required to comply with the preliminary injunction.

Transocean currently has 10 rigs under contract for work in Brazil, with nine currently in country, and is evaluating rig contracts and collaborating with customers to determine appropriate actions with respect to operations. For the six months ended June 30, 2012, the company's operations in Brazil accounted for approximately 11 percent of consolidated operating revenues.

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New Video: Daniel Yergin on Crude Oil's Next Geopolitical Concerns

Crude oil is higher on speculation of China stimulus and Spain's approved austerity budget. Daniel Yergin, IHS vice chairman and author of "The Quest," discusses what geopolitical concerns could continue to weigh on oil prices.



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Iraqi Crude Oil Production Approaching Highest Level in Decades

Estimated Iraqi oil production surpassed 3 million barrels per day (bbl/d) in July 2012, the highest level since the end of the Gulf War in 1990. Increased investment in Iraq's petroleum industry and export infrastructure underpin these production gains. However, many factors still constrain the Iraqi oil industry from reaching its full production potential.

Iraqi production rebounded after 2005. Production in previously developed fields such as Rumaila and West Qurna has increased in recent years. Meanwhile, new upstream investments are boosting output even further. In June 2012, the Halfaya oil field came online, increasing total Iraqi production by an estimated 70 thousand bbl/d, with the potential to produce up to 535 thousand bbl/d.

 




With existing fields like Rumaila and West Qurna and new production coming online in Halfaya, Iraqi production has the potential to exceed 4 million bbl/d. However, constraints including pipeline bottlenecks, export capacity limitations, and security issues still may limit Iraq's oil production potential. Alleviation of these constraints could enable Iraqi oil production and exports to reach record-high levels in the near future.

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Crude Oil and Natural Gas ETF Performance Lacking Spark

The poor performance of commodity exchange based funds relative to underlying crude oil and natural gas prices over recent years stems from inherent inflexibility of ETFs, suggesting investors may be better off going directly to futures markets, according to a study by CME Group directors Richard Co and John Labuszewski.

One popular ETF, the United States Oil Fund LP, underperformed spot crude prices by nearly 200% from December 2008 through April 2011, a period when the market rallied while maintaining a "contango" pattern. The United States Natural Gas Fund ETF also lagged the spot market during that period.

Such ETFs "are generally unable to replicate the performance of the benchmark spot commodity values," Co and Labuszewski wrote. That primarily reflects requirements that these ETFs can’t hold physical inventory, must maintain 100% collateralization with no leverage and must maintain a fixed rollover strategy, regardless of the shape of the forward futures curve.

"The investment and administrative policies of some of the major commodity ETFs contribute to their inability to replicate the performance of the commodities that they purport to represent," they said. "These shortcomings may be addressed by introducing a certain degree of flexibility in the management strategy (and) by relaxing restrictions on collateralization and rollover strategy."

Astute investors, they added, should consider "whether the option of direct investment in futures should be considered as an alternative to investment in an ETF."

Read the full CME Group Report


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Kase and Company....Bad news for November Crude Oil Bulls

It's Wednesday and that means it's time to check in with Kase and Company for their call on November crude oil action.....

The outlook for November crude is negative. Prices have sustained a close below $92.1 for the past two days and should test support at $89.5 tomorrow. A close below this would call for $88.8 and then key support at $87.7 to be met.

Intraday momentum indicators show that the move down is becoming exhausted, so corrections may take place. Initial resistance is $92.5, but until there is a close over $94.3, the near-term bias will remain negative.....Here's the entire post and charts.

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Musings: Energy, Unemployment And The Health of The US Economy

There is nothing more important in determining the outlook for a nation's energy demand than understanding the health of its economy. This is especially true for the United States today as it faces a presidential election focused on dramatically different economic and governing philosophies of the candidates and their views about how fast the economy may grow and, in turn, how much energy the nation will need.

Most people are aware of President Barack Obama's "all of the above" energy strategy, which provides a number of popular talking points about him being open to all forms of energy while campaigning, but in reality means only a few energy sources will be favored. Those favored energy sources seem to be only "green" ones. On the other side of the issue is the Republican standard bearer, Mitt Romney, who is advocating for increased development and use of domestic fossil fuel resources while mandating that very expensive green energy sources need to achieve commerciality on their own and without government mandates and subsidies.....Read the entire Musings article.


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Investor Gold Buying to Resume & Fed Doubling Their Balance Sheet AGAIN!

A leading precious metals consultancy, Thomson Reuters GFMS, has forecast that investors will buy record amounts of gold in the remainder of 2012. GFMS produces the benchmark supply and demand statistics for the gold market. GFMS forecasts that investors will purchase 973 tons of gold in the second half of 2012, more than during the wild gold market of the summer of 2011. This surge in demand for the yellow metal, GFMS says, will move gold above the $1850 an ounce level, not far from the record high of $1920 hit in September 2011.

GFMS may be right. This past week, gold hit its high for this year at $1790 an ounce on the back of the various global stimulus plans launched by a number of countries around the globe. Primary among the recently announced stimulus plans was the Federal Reserve’s QE3 or as some in the market have called it, QE infinity. Philip Klapwijk of GFMS said that, for the gold market, “QE3 has become talismanic”.

The Federal Reserve said it would purchase $40 billion a month in mortgage-backed securities indefinitely. In addition, the Fed will continue Operation Twist – the buying of longer dated U.S. treasury notes and bonds. When all is totaled, the market is looking at about $85 billion a month in government bond purchases for an unlimited period of time.

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The main characteristic of QE3 that drives the gold market is the fact that the open ended purchases of all of these Treasuries will be financed by money that does not yet exist! And it’s not just about a fear of future inflation being ignited by all this money creation. It’s a very logical move higher by gold based on recent history of Fed actions and gold prices.

Even ignoring Operation Twist, the Fed will add $40 billion a month, or $480 billion a year, to its balance sheet. If one looks at the Fed’s own website, you will see that it shows current assets of $2.8 trillion. Add $480 billion annually to that and in about five years the Fed’s assets (the foundation of the money supply) will have nearly doubled.

That is exactly what happened in the last five years too…the Fed’s assets doubled. And in what should not be a surprise to gold investors, the price of gold also doubled! For the past decade or so, gold has tracked the increase in Federal Reserve’s assets. Do not be shocked if that pattern continues over the next five or ten years too.

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