Natural Gas Prices Extend Rally Amid Cooler Weather

Benchmark U.S. natural gas prices rose for the third week in a row, extending a rally to reach the highest levels since December as cooler weather boosted heating demand, the Energy Information Administration said.

Henry Hub gas as of October 10 was $3.26 per million British thermal units, up 5 cents from a week earlier. In midday NYMEX futures trading October 12, November gas fell 0.7 cent to $3.597, up 5.9%, from the end of last week. Futures earlier hit $3.638, the highest price for a nearby contract since early December.

During the week ended October 10, overall U.S. gas demand rose 6% from the previous week, led by a surge of 44% in residential and commercial use.

Working natural gas in underground storage increased to 3.725 trillion cubic feet as of October 5, an implied net injection of 72 billion cubic feet from the previous week and 6.8% over year ago levels.

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Seadrill Partners SDLP Announces Launch of Initial Public Offering

Seadrill Partners LLC ("Seadrill Partners"), a wholly owned subsidiary of Seadrill Limited (NYSE: SDRL) today announced that it has commenced an initial public offering of 8,750,000 common units, representing limited liability company interests, pursuant to a registration statement on Form F-1 (including a prospectus) previously filed with the U.S. Securities and Exchange Commission.

Seadrill Partners intends to grant the underwriters a 30 day over allotment option to purchase up to 1,312,500 additional common units. The common units being offered to the public have been approved for listing on the New York Stock Exchange under the symbol "SDLP," subject to official notice of issuance.

Based on the number of common units to be offered, Seadrill Limited will own a 78.8% limited liability company interest in Seadrill Partners following completion of the Offering (or a 75.7% limited liability company interest, if the underwriters exercise in full their option to purchase additional common units.)

Seadrill Partners was formed by Seadrill Limited to own, operate and acquire offshore drilling rigs under long term contracts. Seadrill Partners' initial fleet will consist of two semi-submersible rigs (West Capricorn and West Aquarius), one drillship (West Capella) and one tender rig (West Vencedor).

The offering of the common units will be made only by means of a prospectus. A written prospectus meeting the requirements of Section 10 of the Securities Act of 1933, when available, may be obtained from the offices of.....Here is a complete list.

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Natural Gas Sentiment Continuing to Change

The US natural gas market is sounding and acting like a market that has no intention of collapsing as it did last winter. More and more signs are pointing to a market that is currently looking higher and not lower. The injection season has been a huge surprise this year with the majority of the weekly injections under performing both last year and the five year average. The surplus of natural gas in inventory peaked versus the same period last year and the five year average in at the end of March when there was about 890 BCF more in inventory than the previous year and about 935 BCF more than the five year average. Since peaking the surplus has steadily declined throughout the inventory building season.

Basis the latest inventory report the surplus declined by 651 BCF or 73% since peaking in the last week of March and 665 BCF or 71% versus the five year average for the same period. This has been a significant turnaround and one that not many analysts were predicting back in the first quarter of 2012. The combination of an above average level of coal to natural gas switching due to very low nat gas prices at the end of the winter, a very early start to a very hot summer period resulting in an increase in nat gas for cooling related power generation demand and a slow but steady reduction in the number drilling rigs deployed to the nat gas sector. In fact rigs deployed to nat gas are now at a 13 year low.

Although natural gas inventories are going to end the season at a new record high the level will be less than 2% above last year. With a more normal winter forecast coupled with supply not soaring it is likely that the price of nat gas will settle into a much higher trading range than last winter and spring. I would expect the futures market to trade in a wide range of about $3 to $3.20/mmbtu on the low side to even as high as $4 to $4.25/mmbtu on the high side if the winter weather truly materializes as forecast.

I am expecting a wide trading range as the winter forecast is uneven with mild temperatures forecast for the first part of the winter heating season (October through December) and much colder and snowy conditions predicted for the second half of the season (January through March). Certainly the forecast can change significantly as time moves forward and any repeat of last winter will change everything as prices will plummet once again as another surplus would build in inventory.....Read the entire Dominick Chirichella CME Group article.

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Weekly Crude Oil, Natural Gas and Gold Technical Outlook for Sunday October 14th

Time for our weekly visit with the staff at Oil N' Gold.com to get their call on crude oil, natural gas and gold......

Despite a brief breach, crude oil failed to stay above 93.33 minor resistance and thus, near term outlook remains unchanged. The fall from 100.42 is still in favor to continue for 61.8% retracement of 77.28 to 100.42 at 86.12 and possibly below. Though, in that case, we'd expect strong support ahead of 77.28 to contain downside. Meanwhile, break of 93.33 will flip bias to the upside for a test on 100.42 resistance.

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

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Natural gas' rally continued last week and reached as high as 3.638 so far. Near term outlook stay bullish as long as 3.327 support holds. Current rise from 1.902 is expected to continue towards medium term channel resistance next (now at around 3.94).

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 3.94) 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

Gold's correction from 1798.1 continued last week. Further decline could be seen. But 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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Dodd-Frank Poses Unique Challenges for Energy Firms

New Dodd-Frank financial regulation poses unique challenges for energy companies, forcing them to establish proper compliance and regulatory reporting mechanisms and making sure they have the right people to carry out these tasks, industry consultant Mayra Rodriguez Valladares said in a report.

Energy and other commodity businesses recently caught a break when a U.S. District Court judge ruled against a Dodd-Frank provision on trading position limits. But because Dodd-Frank focuses substantially on regulating over the counter derivatives and making them more transparent, companies using energy derivatives will be impacted just as much, if not more so, than banks in some ways, she said.

"For energy companies, the biggest challenge will be juggling how to live in an environment of uncertainty and possible increases in costs," Valladares wrote in the first of a series of reports on Dodd-Frank's potential impact on various sectors of the business world.

Valladares, a CME Group featured contributor, is managing principal with MRV Associates, a New York based capital markets and financial regulatory consulting firm.

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New Application of Existing Techniques in Old Fields Helps Russia Increase Oil Production

Russia was the world's largest producer of crude oil in 2011. As Russia's use of multistage hydraulic fracturing and horizontal drilling has increased, preliminary Russian crude oil production figures indicate that production has risen in 2012.

West Siberia, Russia's main producing region, accounts for around 6.5 million barrels per day (bbl/d) of liquids production, nearly two thirds of Russia's total production. While this region is mature, new applications of existing technologies have boosted recovery rates at oil fields that had stopped growing or begun declining.

TNK-BP has announced that it is the first company in Russia to apply a unique improved multistage fracturing technology to develop reserves in mature oilfields in West Siberia. A pilot at the Samotlor oil field has tested a six-stage hydraulic fracturing technology, which resulted in reduced well completion times and increased reservoir productivity. TNK-BP now plans to expand the pilot project to 25 more wells in the Samotlor field by the end of 2012, and, starting in 2013, the company plans to use the technology to fracture about 50 horizontal wells each year across its subsidiaries in Western Siberia.

 

Production from Samotlor, which accounts for about one-quarter of TNK-BP's output, fell 7% in 2011. The drop was low, however, compared to previous years, indicating that the field's future annual declines may be less severe. Continued use of multistage hydraulic fracturing may result in a decline rate of only 1% by 2016.

In addition to TNK-BP, LUKoil is fighting declining crude oil production in the region using multistage hydraulic fracturing at its Tevlinsko-Russkinskoye, Uryevskoye, Vat-Yeganskoye, and Pokachevskoye fields in Western Siberia. According to LUKoil, use of this technique led to a halt in field declines, although the use of the technology may be limited because of its high cost.

LUKoil and TNK-BP were the second- and third-largest producers of oil in Russia in 2010 at approximately 1.8 and 1.4 million bbl/d, respectively.

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Crude Kickbacks Between China and Venezuela

Venezuelan President Hugo Chavez has been in power for 14 years. On Sunday he earned the right to remain there for another six (though he’s battling cancer).

Chavez is often characterized as a dictator, but the truth is, Venezuela’s election process has been lauded by international observers. So if not through brute force, how does a president, whose country has the world’s highest rate of inflation (28%) and a soaring crime rate, win re-election?

Answer: He buys it....Read the entire EconMatters article


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Musings: Is America Knocking On The Door Of Energy Independence?

A phrase introduced into the modern lexicon by President Richard Nixon in the early 1970s was "energy independence". Ever since then, as the nation's domestic oil production declined and our natural gas output stagnated resulting in ever increasing imports of foreign oil and Canadian gas, national politicians campaigned on plans to make America energy independent.

Nearly 40 years after President Nixon uttered the phrase, the shale revolution has transformed America's petroleum industry into an engine for hydrocarbon production growth. With that additional oil and gas production, America's dependence on petroleum imports has declined. Increasingly, not only are the politicians talking about energy independence, but energy industry executives along with energy economists and consultants are also openly talking about the day when the U.S. meets all its power needs from domestic resources.

In late September, the Energy Information Administration (EIA) released data showing weekly domestic crude oil production had reached the highest level since January 1997, some 15 years ago. Reports are that despite the slowdown in drilling in the Bakken formation in North Dakota and Montana, production there should continue to rise during the second half of 2012.

Two charts demonstrate the significance of the increase in domestic production. The first chart shows the weekly estimate of domestic crude oil production since January 1990 with a red line showing how the September 21 data compares with production in early January 1997.......Let's go to the charts.
 

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EIA Natural gas Weekly Update for Week Ending Wednesday 10-10-2012

Natural gas prices rise in Midwest, Rocky Mountains, and Pacific Northwest, fall in California. The Henry Hub spot price rose from $3.21 per MMBtu last Wednesday to $3.26 yesterday, an increase of 5 cents per MMBtu, or 1.5 percent.

Spot prices at the Chicago Citygate (Midwest), Kern River (Rocky Mountains), and Northwest Sumas (Pacific Northwest) trading points increased for the week ending yesterday by 12 cents, 17 cents, and 20 cents per MMBtu, respectively. These increases were a less pronounced continuation of those seen last week at these trading points, likely due to cooling temperatures.

* Natural gas price changes at key trading points were mixed for the report week (Wednesday to Wednesday). The Henry Hub spot price closed at $3.26 per million British thermal units (MMBtu) yesterday, up 5 cents per MMBtu for the week. Spot prices rose in the Midwest, Rocky Mountains, and Pacific Northwest, while falling in Southern California and remaining unchanged in the Northeast.

* The November 2012 New York Mercantile Exchange (NYMEX) edged upwards by 8 cents per MMBtu, from $3.395 per MMBtu last Wednesday to $3.475 per MMBtu yesterday.

* Working natural gas in storage rose last week to 3,725 billion cubic feet (Bcf) as of Friday, October 5, according to EIA's Weekly Natural Gas Storage Report (WNGSR). An implied storage build of 72 Bcf for the week moved storage levels 236 Bcf above year ago levels.

* The Baker Hughes Incorporated natural gas rotary rig count increased by 2 to 437 active units on the week ending October 5. The oil directed rig count fell by 12 to 1,398 units.

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Check out Bill Gross Says Gold Will Thrive in ‘Ring of Fire’

Bill Gross Says Gold Will Thrive in ‘Ring of Fire’

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Bill Gross is one of the most recognizable names in the investment world. He is the founder and co chief investment officer at bond fund giant PIMCO. His long term track record regarding bonds is among the best and he still runs the world’s biggest bond fund, the PIMCO Total Return Fund.

Gross is also known for speaking quite bluntly about the United States’ growing debt problem. His latest monthly market commentary came with a warning for the U.S. and investors alike. Gross stated that a number of recent studies have concluded that “The U.S. balance sheet, its deficit and its ‘fiscal gap’ is in flames and that its fire department is apparently asleep at the station house.”

The recent studies Gross pointed to came from the Congressional Budget Office, the International Monetary Fund and the Bank of International Settlements. The studies calculated that the United States needs to cut spending or raise taxes by 11% of GDP over the next 5-10 years. This translates to $1.6 trillion per year. That compares to the country’s 8% of GDP deficit in 2011. Those numbers put the U.S. in the ‘ring of fire’ with other countries with similar fiscal gap sizes. These countries include Greece, Spain, Japan, France and the U.K.

Gross warned that the U.S. debt problems have put the country in this “ring of fire” that will burn most investors. The only investors who will not get “burned”? He says the lucky few will be those that are protected by gold and other real assets, protected from a severe U.S. dollar depreciation caused by the Federal Reserve’s money printing.

In a white paper titled “GOLD – The Simple Facts” posted on PIMCO’s website, PIMCO analysts Nicholas J. Johnson and Mihir P. Worah also said some interesting things. Here is an excerpt, “Our bottom line: given current valuations and central bank policies, we see gold as a compelling inflation hedge and store of value that is potentially superior to fiat currencies.” They pointed out the positive supply/demand characteristics of gold as a big plus in their scenario. The PIMCO analysts went on to say, “We believe investors should consider allocating gold and other precious metals to a diversified investment portfolio.”

That is quite a statement coming from a “mainstream” investment firm. Wall Street’s usual reaction to gold is that it is a barbarous relic whose only use is in jewelry and that no sane investor should put any money into it, even paper gold instruments such as gold ETFs like the SPDR Gold Shares (NYSE: GLD) and others.

After Bill Gross’ bullish words, gold prices were trading a 7 month high on Thursday before falling Friday to finish the week at about $1776.00 an ounce.

From a technical analysis point of view gold, silver and gold miners have been holding value at key resistance levels. While we could see a 3-5% pullback before they breakout and start the next rally overall the outlook for precious metals remains very strong and I put a $2400 per ounce on gold for 2013.

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Chris Vermeulen

The New Normal for U.S. Geopolitics

Posted courtesy of our friends at EconMatters.....

Over the past weekend, rumors began to emerge that the Syrian opposition would allow elements of the al Assad regime to remain in Syria and participate in the new government. Rumors have become Syria's prime export, and as such they should not be taken too seriously. Nevertheless, what is happening in Syria is significant for a new foreign doctrine emerging in the United States, a doctrine in which the United States does not take primary responsibility for events, but which allows regional crises to play out until a new regional balance is reached. Whether a good or bad policy, and that is partly what the U.S. presidential race is about, it is real, and it flows from lessons learned.

Threats against the United States are many and complex, but Washington's main priority is ensuring that none of those threats challenge its fundamental interests. Somewhat simplistically, this boils down to mitigating threats against U.S. control of the seas by preventing the emergence of a Eurasian power able to marshal resources toward that end. It also includes preventing the development of a substantial intercontinental nuclear capability that could threaten the United States if a country is undeterred by U.S. military power for whatever reason. There are obviously other interests, but certainly these interests are fundamental.

Therefore, U.S. interest in what is happening in the Western Pacific is understandable.....Read the entire article.

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EIA: Territorial Disputes Hamper Exploration and Production of Resources in the East China Sea

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The East China Sea may have abundant hydrocarbon resources, especially natural gas, although the region is underexplored. China and Japan, the two largest energy consumers in Asia, are both interested in using natural gas from the East China Sea to meet rising domestic demand. However, unresolved territorial disputes make exploration and development of these resources difficult.

China is the world's largest energy consumer and the second largest importer of oil after the United States. Because of its growing reliance on natural gas in recent years, China is now a net importer of natural gas. EIA forecasts continued growth in Chinese oil and natural gas consumption, necessitating new supplies to meet demand.

Japan is the world's third largest net importer of crude oil, and the world's largest importer of liquefied natural gas. Japan is expected to continue to rely heavily on imports to meet future consumption needs.

Hydrocarbon reserves in the East China Sea are difficult to estimate, but EIA estimates the East China Sea contains 60-100 million barrels of oil in proven and probable reserves, and 1-2 trillion cubic feet (Tcf) of proven and probable natural gas reserves. Estimates of undiscovered resources, which do not take into account economic and technological factors relevant to bringing them into production, show significant resource potential. Chinese sources estimate as much as 70-160 billion barrels of oil and 250 Tcf of natural gas in undiscovered, technically recoverable resources.

Chinese authorities seek to increase offshore natural gas production to supply Shanghai and nearby cities. However, the East China Sea is not expected to become a significant supplier of oil for a number of years, even after resolution of the territorial disputes.

China and Japan have two separate territorial disputes in the East China Sea: where to demarcate the sea boundary between each country and how to assign sovereignty over a group of islands called Diaoyu by the Chinese and Senkaku by the Japanese. The two countries have held bilateral talks, as well as considered joint development of resources in the Sea, with no agreement thus far.

Further exploration and development in this region may be hampered until these disputes are resolved. For more information on the East China Sea, read EIA's regional analysis brief.

70 Second Market Outlook – Metals, Dollar, Bonds, Stocks, Energy

Over the past year we have had some really interesting things unfold in the market. Investing or even swing trading has been much more difficult because of all the wild economic data and daily headline news from all over the globe causing strong surges or sell offs almost every week.

For a while there you could not hold a position for more than a week without some type of news event moving the market enough to either push you deep in the money or get stopped out for a loss. This has unfortunately caused a lot of individuals to give up on trading which is not a good sign for the financial market as a whole.

The key to navigating stocks which everyone thinks are overbought is to trade small position sizes and focus on the shorter time frames like the 4 hour charts. This chart is my secret weapon and giving you both large price swings which daily chart traders focus on while also showing clear intraday patterns to spot reversals or continuation patterns with precise entry/exit points.

While I could ramble on about why the stock market is primed for major long term growth from this point forward I will keep things short and simple with some 4 hour and daily charts for you to see what I see and what I am thinking should unfold moving forward.

Keep in mind, the most accurate trading opportunities that happen week after week are the quick shifts in sentiment which only last 2-5 days at most which is what most of my charts below are focusing on…..

Dollar Index – 4 Hour Chart

This chart shows a mini Head & Shoulders reversal pattern and likely target over the next five sessions. The dollar index has been driving the market for the past couple years so a lower dollar means higher stock and commodity prices.

Bond Futures – 4 Hour Chart

Money has been flowing into bonds for the past couple weeks with most traders and investors expecting a strong correction in stocks. As you can see the price of bonds hit resistance this week and as of Thursday has now started selling off. Money flowing out of this “Risk Off” asset means money will move to the “Risk On” investments like stocks and commodities.

Gold Futures – Daily Chart

Gold is stuck in both categories in my opinion. It is a “Risk Off” safe haven when people are scared of falling stock prices, and it is also a “Risk On” speculative investment when people are feeling good about the market. Gold has been trading at key resistance for a couple weeks and looks as though it’s starting its next rally.

Silver Futures – Daily Chart

Silver is in the same boat as gold though it carries much more volatility than gold. Expect 2-4% swings regularly and sloppy chart patterns in this metal.

SP500 Futures – Daily Chart

As much as everyone hates to buy stocks up at these lofty prices I hate to say it but I think they are going to keep going up and they could do this for a long time yet. If the dollar index continues to break down then I expect the SP500 to rally another 3% from here (1500) in the next 1-2 weeks.

Crude Oil Futures – 4 Hour Chart

Crude oil has not had much attention from me in the past few months. While it has had big price action many of those big days took place on news causing an instant price movement making this extra dangerous to trade. I continue to watch rather than get attached to it.

Natural Gas Futures – Daily Chart

Natural gas has been a great performer for us in the past 6 months as all the short positions slowly get covered. I just closed out my natural gas ETF trade this week with a 31.9% gain and plan on getting back in once the chart provides another low risk setup.

Trading Conclusion:

In short, I feel the dollar index along with bonds will correct over the next few weeks. That will trigger buying in stocks and commodities. Keep in mind natural gas dances to its own drum beat. The dollar does not have much affect on its price and most times natural gas is doing the opposite of the broad market.

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Chris Vermeulen

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This Weeks EIA Natural Gas Update For Thursday October 4th

* Natural gas prices posted increases across the board for the report week (Wednesday to Wednesday). The Henry Hub closed at $3.21 per million British thermal units (MMBtu) yesterday, up 29 cents per MMBtu for the week. Other spot prices rose roughly between 20 and 40 cents per MMBtu.

* On Thursday, the November 2012 New York Mercantile Exchange (NYMEX) contract moved into the near month position. It increased from $3.023 per MMBtu last Wednesday to close at $3.395 per MMBtu yesterday. It traded above most spot prices for the duration of the week.

* Working natural gas in storage rose last week to 3,653 billion cubic feet (Bcf) as of Friday, September 21, according to the U.S. Energy Information Administration’s (EIA) Weekly Natural Gas Storage Report (WNGSR). An implied storage build of 77 Bcf for the week moved storage levels 272 Bcf above year ago levels.

* The Baker Hughes Incorporated natural gas rotary rig count fell by 19 to 435 active units on the week ending September 28, after increasing the week before. The oil directed rig count increased by 8 to 1,410 units.

Get the EIA's complete natural gas weekly update

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Gold Hits Record High in Euros and it’s Setting Up for Another Rally

The price of gold hit a record high this past week.....in euro terms (at about 1380 euros). The record came after a number of actions by central banks around the world, trying to stimulate their respective economies. The actions, usually centered around money printing, once again had investors looking for refuge in gold.

Since the beginning of September, investors have bought about 75 tons of gold through exchange traded funds. Reuters says that gold ETFs, such as the largest gold ETF – the SPDR Gold Shares (NYSE: GLD), are on track for their biggest quarterly inflows in over a year, of 3.285 million ounces. Finally, according to UBS, investors have also raised their bullish bets on gold futures to the highest level in more than a year.

All the world’s major central banks took action recently including the Bank of Japan which launched a fresh round of monetary stimulus. The main action though was centered in Europe and the United States. The European Central Bank has promised to buy an unlimited quantity of eurobonds going forward. And the Federal Reserve announced its third round of monetary stimulus, QE3, that promises to buy $40 billion of mortgage backed securities monthly on top of its ongoing Operation Twist program of buying long dated Treasuries.

Speaking about the monetary easing, Barclays precious metals analyst Suki Cooper put it this way to the Financial Times, “Gold finally found the catalyst it had been waiting for all year after the Fed announced open ended quantitative easing.”

Another reason for gold’s rise in euro terms, it must be noted, is the continuing fiscal turmoil in Europe itself, particularly in Spain. Spain’s largest autonomous region, Catalonia, manages an economy as big as Portugal’s. The problem is that it has debts of 42 billion euros which it is struggling to service. Catalonia has requested a 5 billion euro temporary bailout from Spain’s central government, adding to its debt burden. In a real show of defiance, Catalonia is also refusing to implement austerity measures. Add to that, bank stress tests in Spain showed that the country’s 14 largest lenders will need 60 billion euros in new capital.

No surprise then that physical demand for gold bars and coins in Europe rose 15 percent in the second quarter, according to the World Gold Council!

Another positive fundamental reason in the corner of gold bulls is the recent currency appreciation in the Indian rupee. India is traditionally the world’s largest consumer of gold. Sales have been slow there this year due to the government trying to slow down gold sales there through rises in a gold import tax. However, the recent rise in the rupee has made gold purchases more palatable and gold sales to India have hit their highest level in two months.

So for now, many of the fundamentals look to favor a move higher for gold, although there is technical resistance at its 2012 high of $1791.

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Chris Verneulen

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Dominick Chirichella: Crude Oil Prices steady Despite Clear Signs of Slowing Asian Markets

In another clear sign of the slowing of the Asian economy the Reserve Bank of Australian (RBA) cuts its short term interest rate by 25 basis points as it attempts to offset the closing of mines and laying off of thousands of workers. Short term interest rates are now at the lowest level since 2009. Australia is a commodity dependent country with many of those commodities exported to China. With China and most of the developed world continuing to slow commodity consumption is also slowing. The Australian economy is being directly impacted by the slowing of commodity consumption. Australia's action is not only a negative for the Australian currency but a bearish sign for oil demand growth as well as other traditional commodity consumption growth.

On the European front the market continues to watch what Spain will or will not do regarding asking for a bailout. The fact that both sides of this ongoing act continue to try to position themselves prior to a request it creates an atmosphere of uncertainty over the EU sovereign debt issues as well as the EU economy. In addition the Greek situation remains unclear as discussions continue on whether or not Greece will get its next scheduled batch of bailout money. Aside from those issues clouding the EU landscape there is not much else going on in Europe today.

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In the US Fed Chairman Bernanke defended his actions with QE3 yesterday in a speech. He basically said QE3 will stimulate growth, cut unemployment and help savers support the US dollar. In my view that is one tall order and one that I still do not see exactly how QE3 is going to do all of that so seamlessly since the US has already had QE1, QE2 and Operations Twist (which is still ongoing) and the US economy is still contracting while unemployment is not improving. Interestingly I would have to say the market is not yet convinced of Mr. Bernanke's claims as there has not been a sustained rally in risk asset markets since QE3 has been announced. It has been a rather tepid reaction in the market. Supporting oil prices a tad was the better than expected ISM factory index (an energy sensitive index) which increased to 51.5 in September which was above the consensus forecasts.....Read the entire article at CME Group.com

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U.S. Marketed Natural Gas Production Levels off in the First Half of 2012

U.S. marketed natural gas production has flattened since late 2011, mainly in response to lower natural gas prices. Nevertheless, volumes remain at historically high levels. From January through July 2012, marketed natural gas production set a record high for the first seven months of any year, averaging 68.9 billion cubic feet per day (Bcf/d), up nearly 4 Bcf/d, or 5.9%, from the same period a year earlier.




While production was higher for each month from January through July 2012 compared to the same month a year earlier, monthly production has remained close to its level at the end of 2011. Data for August 2012 will likely show a significant drop in average daily production as Hurricane Isaac shut in many offshore wells for several days.

Due in part to lower natural gas prices and comparatively high prices for natural gas liquids, some producers increasingly targeted liquids rich portions of shale formations, contributing to the overall flattening of natural gas production.



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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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