Oil N' Gold Focus Reports: Crude Oil, Natural Gas and Gold Weekly Technical Outlook

Nymex Crude Oil (CL)

Crude oil's recovery was limited at 84.53 last week and the outlook remains basically unchanged. Price actions from 80.06 is still being treated as correction to fall from 88.63 only. With 4 hours MACD staying below signal line, initial bias is neutral this week. On the downside, below 80.06 will indicate that fall from 88.63 has resumed and should target 61.8% retracement of 70.76 to 88.63 at 77.59 and below. However, note that break of 84.53 resistance dampen this view and argue that fall from 88.63 might be completed already. In such case, stronger rebound should be seen to retest 88.63 high instead.

In the bigger picture, the steeper than expected fall from 88.63 is mixing up the outlook and argue that rise from 64.23 is possibly finished with three waves up to 88.63. In other words, it could be the second wave of consolidation from 87.17 and the third wave might have just started. We'll now slightly favor more decline as long as 88.63 resistance holds. Nevertheless, medium term rise from 33.2 is treated as the second wave of the consolidation pattern that started at 147.27. As long as 64.23 support holds, medium term rise from 33.2 is still in favor to extend to 50% retracement of 147.27 to 33.2 at 90.24 and possibly higher before completion.

In the long term picture, rebound from 33.2 is not finished yet. But overall view remains unchanged. Crude oil is in a long term consolidation pattern from 147.27, with first wave completed at 33.2, second wave from there unfolding. Current development suggests that a breach of 61.8% retracement at 103.70 is likely. But we'll then start to focus on reversal signal again above 103.70.

Nymex Crude Oil Continuous Contract 4 Hour, Daily, Weekly and Monthly Charts

Nymex Natural Gas (NG)

Natural gas rose further to as high as 4.411 last week and closed strongly. Initial bias remains on the upside for further rally this week. Current rise from 3.255 should now be targeting next key resistance at 5.194. On the downside, below 4.115 minor support will turn intraday bias neutral again. But after all, we'd still favor another rise as long as 3.71 support holds, even in case of deep retreat.

In the bigger picture, break of the falling trend line from 6.108 add some credence to the case that decline from there is completed with three waves down to 3.22 already. That is, it's merely a correction to rebound from 2.409 and such medium term rally is possibly resuming. Break of 5.194 resistance will solidify this case and target another high above 6.108 to 100% projection of 2.409 to 6.108 from 3.255 at 6.954 next. On the downside, break of 3.71 support is needed to invalidate this view. Otherwise, we'll stay bullish.

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

Comex Gold (GC)

Gold's recovery from 1329 was limited at 1382.9 and reversed. The structure of such recovery suggests that it's merely a correction to fall from 1424.3. Initial bias remains cautiously on the downside this week for 1315.8/1329 support zone. Decisive break there will complete a head and shoulder top reversal pattern and should turn outlook bearish for deeper fall. On the other hand, strong rebound from 1315.8/1329 will indicate that gold is merely in sideway consolidation and another high would still be seen before topping.

In the bigger picture, rise from 1155.6 is treated as the fifth wave of the five wave sequence from 1044.5, which should also be fifth wave of the rally from 681 (2008 low). There is no confirmation of topping yet. However, note that 1424.3 record high was close to two important projection target, 161.8% projection of 931.3 to 1227.5 from 1044.5 at 1449.6 and 100% projection of 253 to 1033.9 from 681 at 1462. Reversal should be imminent. Break of mentioned 1315.8/1329 will signal that 1424.3 is an important top and gold should have started a sizeable medium term correction that should dip back into 1044.5/1227.5 support zone at least.

In the long term picture, rise from 681 is treated as resumption of the long term up trend from 1999 low of 253. 100% projection of 253 to 1033.9 from 681 at 1462 is almost met and a sizeable correction should be around the corner. Though, even in case of deep fall, 55 months EMA (now at 931 level) should present strong support to contain downside and bring another up trend.

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

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Commodity Corner: Crude Oil Ends Lower on Stronger Dollar

Crude oil lost ground Friday, dogged by a weaker euro resulting from continued fears that Europe's spate of debt crises will spread from Ireland to Portugal and Spain.

Oil for January delivery fell 10 cents to end the day at $83.76 a barrel. The euro declined 0.9 percent against the greenback Friday. Thanks to Ireland's debt woes, along with those elsewhere in the bloc, the EU currency has slipped by more than seven percent in less than a month. A stronger dollar makes oil less of a value for those holding other currencies. Oil traded from $82.78 to $83.87 Friday.

Buoyed by predictions of colder temperatures in December for much of the country, January natural gas rose by a penny Friday to settle at $4.40 per thousand cubic feet. The December contract, which expired Wednesday, settled at $4.27.

The January natural gas futures price fluctuated from $4.35 to $4.48 Friday. December gasoline was unchanged Friday, again settling at $2.21. It traded within a range from $2.20 to $2.23.

Posted Courtesy of Rigzone.Com

Recent post "Holiday Squeeze on the Dollar, Gold & Stocks"

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Crude Oil Futures Decline on Concern Ireland Crisis May Spread, Tension in Korea

Crude oil fell from a one week high on concern Ireland’s debt crisis will spread to Portugal and Spain, reducing economic growth and fuel demand, and as tensions in Korea mounted. Oil dropped as the euro declined to a two month low against the dollar, curbing investor demand for commodities. Euro area finance ministers plan to complete an agreement on an Irish bailout on Nov. 28, a European Union official said on condition of anonymity. North Korea warned its confrontation with South Korea could lead to war.

“Concerns that the European debt crisis will spread pushed the euro to a new two month low against the dollar,” said Tom Bentz, a broker with BNP Paribas Commodity Futures Inc. in New York. The oil market is down “primarily on European debt worries.” Crude oil for January delivery slipped 10 cents to settle at $83.76 a barrel on the New York Mercantile Exchange. The January contract gained 2.2 percent this week. The front month contract added 2.8 percent for the week and has increased 7.4 percent in the past year.

Brent crude oil for January settlement declined 52 cents, or 0.6 percent, to end the session at $85.58 a barrel on the London based ICE Futures Europe exchange. Brent added 1.5 percent for the week. Shoppers crowded U.S. stores for Black Friday, the biggest shopping day of the year and a bellwether for the holiday season. Analysts’ estimates for holiday sales vary from little changed to increases of 4.5 percent. The National Retail Federation has forecast November-December holiday sales will rise by 2.3 percent from a year ago, the most since 2006.......Read the entire article.

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Bruce Pile: Oil....Beyond the Barrel - And Over the Cliff

From guest analyst Bruce Pile of  Good Stock Investing......

As the price of oil climbs through $85 a barrel, it reminds me of the explanations flying around a little over two years ago as oil went to this level for the first time. "It's all the funds chasing the hot commodity, the only game in town" was the refrain. It's all a bubble and we will have stable oil at $35 soon - that's what Steve Forbes and many others said. But now, as oil goes through $85, it's not the only game in town. In fact, it's been the dog underperforming just about everything. No desperate performance chasing mania is driving the price of oil today as we threaten $100 again. Could those peak oil nuts be right? Could the Great Recession be camouflaging a real supply peaking process?

There is an interesting article out just yesterday over at The Post Carbon Institute by Tom Whipple. He states:

For two weeks now the peak oil portion of cyberspace has been abuzz with commentary on the International Energy Agency’s (IEA) newly released World Energy Outlook 2010. Without missing a beat and without much explanation, the world’s leading compiler of everything about energy has gone from denying that conventional oil production will peak in our lifetime to saying it happened four years ago.

What? A conventional oil peak happening in late 2005? That's what nuts like Ken Deffeyes and me were saying back then. Overall barrels of what is classified as "oil" isn't peaking. But conventional oil was peaking then, and that's where all the net energy is. As Tom Whipple's article points out, it's net energy that is missing from the equation of energy planners. And, as I wrote in an article about back in April, this miscalculation is a potential nightmare waiting to engulf us. CNBC had just started showing their "Beyond The Barrel" story, and this prompted me to post "Beyond The Barrel - And Over The Cliff" on my blog where I look at this whole conventional vs nonconventional, net energy peak thing. This is the post:

CNBC premiered "Beyond the Barrel - the Race to Fuel the Future". This is a look at the alternatives to the crude oil bursting forth from the ground that has spoiled us for decades with cheap, abundant energy. One thing that will probably be missing in the discussion is the major issue EROEI. What is EROEI? How do you pronounce it? Well, I don't concern myself with pronouncing it, but I do get vexed by how much attention is being paid to it.......Read the entire article.


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Musings: Separating Wheat from The Chaff of Unconventionals

Increasingly, petroleum industry executives are speaking out about the significance of the unconventional hydrocarbon resources in this country, although they do not always agree about the longer term outlook for the resources. In some cases we question the extrapolations speakers are making about the importance of unconventional resources in the nation’s long range energy mix and, for that matter, the world’s mix.

Recently, several senior energy executives spoke at industry meetings about their views of these trends. One presentation that received media attention was by Mark Papa, CEO of EOG Resources, Inc. (EOG). His presentation was to a joint meeting of the Houston chapters of the IPAA and TIPRO. With respect to the success of unconventional drilling and production, Mr. Papa called it a “game changer” for the industry, something about which most industry participants would readily agree.

Horizontal drilling and hydraulic fracturing technologies have dramatically altered the near term supply picture and have forced energy prognosticators to recast their forecasting models. Most of them now are calling into question the need for the U.S. to import as many hydrocarbons as previously thought. Optimism is fine, but euphoria can be dangerous as it tends to create blind spots that become our downfall.

According to Mr. Papa, “There is clearly sufficient North American gas supply to last for a bunch of years; 50 years at least. And there is clearly no need for us to import LNG (liquefied natural gas) for multiple years to come.” At the present time, natural gas supplies are swamping the market due to the drop in demand associated with an overall decline in energy consumption due to the lasting effects of the recession and the surge in unconventional supply due to accelerated drilling dictated by the need for producers to hold leased acreage for which they have offered huge bonuses.......Read the entire article.


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ONG Focus: Crude Oil and Gold Daily Technical Outlook For Friday Nov. 26th

Crude Oil Daily Technical Outlook

Crude oil jumped to as high as 84.53 but was limited by mentioned 85.42 resistance and weakens again. With 4 hours MACD crossed below signal line, intraday bias is turned neutral. As noted before, decline from 88.63 is still in favor to continue with 84.52 resistance intact. Break of 80.06 will target 61.8% retracement of 70.76 to 88.63 at 77.59 and below. Though, above 84.53 will now flip intraday bias back to the upside for retesting 88.63 high.

In the bigger picture, the steeper than expected fall from 88.63 is mixing up the outlook and argue that rise from 64.23 is possibly finished with three waves up to 88.63. In other words, it could be the second wave of consolidation from 87.17 and the third wave might have just started. We'll now slightly favor more decline as long as 88.63 resistance holds. Nevertheless, medium term rise from 33.2 is treated as the second wave of the consolidation pattern that started at 147.27. As long as 64.23 support holds, medium term rise from 33.2 is still in favor to extend to 50% retracement of 147.27 to 33.2 at 90.24 and possibly higher before completion.

Nymex Crude Oil Continuous Contract 4 Hour and Daily Charts

Gold Daily Technical Outlook

With 4 hours MACD crossed below signal line, Gold's recovery from 1329 should have completed at 1382.9 already. Intraday bias is now cautiously on the downside for 1315.8/1329 support zone. Decisive break there will complete a head and shoulder top reversal pattern and should turn outlook bearish for deeper fall. On the other hand, strong rebound from 1315.8/1329 will indicate that gold is merely in sideway consolidation and another would still be seen before topping.

In the bigger picture, rise from 1155.6 is treated as the fifth wave of the five wave sequence from 1044.5, which should also be fifth wave of the rally from 681 (2008 low). Such rally might still continue towards 161.8% projection of 931.3 to 1227.5 from 1044.5 at 1449.6 before completion. Though, we're aware of long term projection target of 100% projection of 253 to 1033.9 from 681 at 1462 and we'd anticipate strong resistance from there to bring medium term correction finally. On the downside, however, break of 1315.8 support will be an early alert of medium term reversal and will turn focus back to 1155.6 support for confirmation.

Comex Gold Continuous Contract 4 Hour and Daily Charts


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Flurry of Rig Orders Marks End of Two Year Drought

Since the start of October, drilling companies have ordered at least 17 new rigs, a wave of spending that signals optimism that oil prices will remain high and that producers will continue to demand the latest advances in equipment as they tap increasingly hard to reach offshore reservoirs. Largely built "on spec", that is, without an existing contract from an oil and gas explorer,those orders mark a clear ending to a two year drought in rig purchases as drillers like Transocean, SeaDrill and Atwood Oceanics look to update and bolster their fleets.

The move also indicates how the global enthusiasm for exploiting offshore oil and gas continues, despite the slowdown in U.S. drilling that came as a result of the Deepwater Horizon oil spill.
Of the 17 orders so far this quarter, 13 are for jackup rigs, which stand on legs and typically operate in water depths up to 400 feet. By comparison, only eight jackups were ordered in the two years that ended Sept. 30, according to Tom Curran, senior analyst with Wells Fargo Securities' Oilfield Services & Drilling team.

The quarter's four orders for floating deep-water rigs, which can take three years or more to construct, are the first shipyards have seen since 2008, Curran said. The orders primarily have gone to yards in Southeast Asia......Read the entire article.



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Bloomberg: Crude Oil Declines Because of Concern Ireland Debt Crisis May Spread to Spain

Crude oil declined in New York amid concern Ireland’s debt crisis will spread to Portugal and Spain, diminishing the appeal of the region’s assets. Futures slipped as the euro dropped against the dollar, curbing investor demand for raw materials. Floor trading was closed yesterday for Thanksgiving in the U.S. and electronic trades will be booked with today’s for settlement purposes.

With the U.S. markets closed “attention was instead focused on Europe and Ireland bailout talks, with sovereign debt concerns weighing on oil prices,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a note today. The January contract fell 32 cents, or 0.4 percent, to $83.86 a barrel, in electronic trading on the New York Mercantile Exchange at 11:58 a.m. Sydney time. Futures are 2.9 percent higher this week, heading for the first weekly gain in three weeks. Prices are up 5.6 percent this year.

Oil rose the most in four months on Nov. 24 after U.S. jobless claims fell to the lowest level since 2008, bolstering optimism economic growth will accelerate in the biggest crude consuming nation. The Labor Department said applications for unemployment benefits declined by 34,000 to 407,000. Brent crude for January settlement gained 26 cents, or 0.3 percent, to settle at $86.10 a barrel on the London based ICE Futures Europe exchange yesterday.

Posted courtesy of Bloomberg News

Bloomberg reporter Ben Sharples can be contacted at bsharples@bloomberg.net


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The S&P 500, Gold, Crude Oil, and the Banks

As you probably already know option trading has become a growing branch of the trading world. The reasons for this rapid growth are numerous but include the ability to control risk, take advantage of the inevitable decay of the time premium portion of an option’s price, and to exploit the predictable and stereotypic changes in the factors controlling option pricing that occur on a regular basis. Nobody knows the in's and out's of options trading better the J.W. Jones. Here is his latest article that will get you ready for Monday's trading session......

Stocks were back on sale Tuesday when the S&P 500 suffered more than a 1.40% decline by the closing bell. Some market prognosticators pointed their fingers at the dollar, other pointed at the Korean situation, and still others had their eyes fixed on Ireland and the Eurozone as potential causes for the sharp selloff. The S&P 500 is currently oversold on the short term chart and either a bounce or period of consolidation is likely. At this point, chasing stocks in either direction will only satisfy the desires of the smart money, who will likely blow these anticipatory traders into trading fodder in coming weeks.

Right now, patience is a must. The day before Thanksgiving is synonymous for light volume as are most days preceding a holiday. Thanksgiving leads us into the holiday season which typically is characterized by low volume until after the New Year. As most traders know, when volume is light the market typically has a positive bias. I would not be shocked to see U.S. stocks trading higher Wednesday and/or Friday.

While the short term charts are oversold, the longer term charts continue to have a technical bias to the upside assuming the 50 period moving average does not get violated. Time will be the final arbiter as to whether this correction is relatively mild before stocks continue higher, or if this is the beginning of a larger correction.

Gold (GLD Daily)
At this point in time, gold is forming a possible head and shoulders pattern on the daily chart. While it is too early to determine if the pattern will play out, if the expected price action confirms the head and shoulders top then the measured move would indicate price levels around the GLD 120-122 area will likely be revisited. Currently gold and the GLD trading ETF are not offering a great risk/reward entry from a long or short perspective, and even if it were I would simply watch the action unfold until we get confirmation that the head and shoulders pattern is going to either be confirmed or fail. Caution is warranted and risk remains high.

Oil (USO Weekly)
USO has been in a consolidating pattern for well over a year and it continues to build this monster base between the 32 – 42 price levels. When this base is finally broken, a major move in oil will likely be underway. I am expecting that price will get close or test the bottom of the range for an outstanding low risk long entry using the bottom of the base as a backstop for risk definition. It is hard to say where price is heading in the short term, but from a fundamental perspective oil has some positive bias with increasing demand coming from emerging markets and a slowdown in future supply.

The Banks (XLF Daily)
Recently the XLF ETF (the financials) had a breakout of a long-term consolidation pattern which has failed. With that failure, the broader markets have sold off from recent highs. If the XLF and KRE continue to be under pressure, it is unlikely that the broader market as a whole will continue higher. It is critical for traders to follow the financial sector because the broad markets will go nowhere without their participation.

Like it or not, our financial complex has to be healthy in order for our economy to improve with any lasting effect. If banks are not lending, then it is safe to say the economy is not expanding at a fast pace. If the banks are not profitable or are not consistently growing their revenues, this would again be a negative indicator regarding economic growth.

There are a lot of analysts who are showing concerns over future profitability amid countless issues which include mortgage defaults, over exposure to commercial real estate and development loans, and potential prosecution in lieu of the way the large money-center banks handled foreclosures. Additionally, companies like PIMCO and other investment firms are attempting to return the mortgages they bought back to the banks through legal action which could lead to further losses. While the outlook is certainly not great, I would not expect any powerful rallies if financials are not following along.

Conclusion
With the shortened holiday week, I will not be offering an option trading setup. I am simply watching the price action and sitting in cash. When volume is this light, the markets generally have an upward bias and with the large selling volume we witnessed on Tuesday, a bounce is likely overdue. Until the S&P 500 gives up the 50 period moving average, we remain in a technically constructive pullback which could potentially lead to higher prices. If we get a daily close on the S&P below the 50 period moving average, all bets are off.

In closing, I hope this find you well and I wish all of you and your families a safe and Happy Thanksgiving!

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Holiday Squeeze on the Dollar, Gold & Stocks

The past week and a half has been as choppy as it gets for the stocks market. Thankfully the herd mentality (fear & greed) stays the same. Understanding what others think and feel when involved in the market is one of the keys to making money consistently from the market. The crazy looking chart below I will admit is a little tough on the eyes, and I should have used red and green for holiday colors but green just was not going to work today so bear with me.

Market Internal Indicators – 10 minute, 7 day chart
This is a simple chart to read if you understand how to trade these market internal indicators (NYSE volume ratio, NYSE Advance/Decline line, and Total Put/Call ratio).

It shows and explains how I get a read on the overbought/sold conditions in the market. There are several other criteria needed to pull this trade off but it is these charts which tell me to start getting ready to take partial profits, buy or take short positions.

The top section shows the NYSE volume ratio line. When the green line spikes is means there are more sellers than buyers by a large amount and I call this fear. On the other hand when he red line spikes it shows everyone is chasing the price higher because they can’t stand the thought of missing another rally. I call this greed or panic buying. You buy into fear, sell/short into greed.

Important point to note though… We are getting another sell/short signal here (Wednesday) but knowing Friday will be light volume and knowing that light volume means higher prices, I think we should get a better opportunity to short this new down trend next week at possibly a higher level. The market may have a short squeeze in the next 2-3 days. Just so you know, a short squeeze is when the market breaks to the upside on light volume forcing the short positions to cover. This creates a pop in price, only for it to drop quickly after. But, if we get a pop with solid volume behind it, then we could just see the up trend start again and we would then look to play the long side. Only time will tell…

Rising Dollar & Gold – I Don’t Get It?
That is the question everyone seems to be asking this week. I think what we are seeing is straight forward. Traders/investors are selling Euros because of the issues overseas and are buying the dollar along with gold and silver.

Generally when the dollar raises gold drops, but they are both moving up in sync, and really I don’t see the problem with this as it has happened many times in the past. Currently I am neutral on gold and silver because of this situation though. I feel something is about to happen in a week or so that will change things in a big way.

Mid-Week Gold, Dollar & Stock Trading Conclusion:
In short, the equities market is now in a down trend and overbought here. It’s prime for a short position but with the holiday, light volume Friday, and most likely a follow through buying session on Monday I think its best to sit in cash without the stress of wondering what will happen on Monday. Just enjoy the holiday.

Recently members had a great short play locking in 2.2% gain on one of our positions this week as we shorted the market using the SDS inverse SP500 ETF. We also continue to hold two other positions with a 22 and 24% gain thus far and I think going into year end things are really going to heat up.

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Commodity Corner: Crude Oil Up 3.2%

Positive economic data and a lower than expected build in U.S. crude oil inventories resulted in a pre holiday boost for January oil futures.

The front month futures price settled at $83.86 a barrel Wednesday, a $2.61 gain from the previous day, after trading within a range from $80.97 to $83.75. Supporting oil were statistics released Wednesday indicating some glimmers of hope for the U.S. economy. According to the U.S. Department of Commerce, personal income increased 0.5 percent in October above private sector expectations. In addition, the agency stated that real consumer spending rose by 0.3 percent during the same period.

Also benefiting oil was an economic indicator in the Thomson Reuters/University of Michigan Surveys of Consumers, a monthly publication that was released Wednesday. The latest findings observe a 5.8% increase in consumer sentiment, from 67.7 in October to 71.6 in November. Nevertheless, the survey's authors caution that the significant increase does not necessarily mark a "turning point" in consumers' personal financial prospects. Indeed, they note that many consumers continue to report worsening personal finances.

"While consumers clearly believe that the recovery has gained some traction, most still think that the economic gains will be too small to improve their own job and income position anytime soon," stated Richard Curtin, Surveys of Consumers Chief Economist.

In its weekly report on the country's crude oil stocks, the U.S. Department of Energy's Energy Information Administration (EIA) reported that inventories rose to 358.6 million barrels as of November 19, 2010. Last week's 1 million barrel gain reverses a sharp decline reported for the week of November 12, but the gain was lower than analysts had anticipated.

Natural gas for December delivery showed very little movement Wednesday, ending the day a penny higher at $4.27 per thousand cubic feet. Expectations of milder weather in the Northeast, along with very high storage volumes, prevented gas from increasing further. Front month natural gas peaked at $4.38 and bottomed out at $4.18.

December gasoline settled at $2.21 a gallon Wednesday, representing an eight cent gain from the previous session. Gasoline traded from $2.13 to $2.21.

Posted courtesy of Rigzone.Com


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SP 500, Crude Oil, Natural Gas, Gold and U.S. Dollar Commentary For Wednesday Evening Nov. 24th

The S&P 500 index closed higher due to short covering on Wednesday as it consolidated some of Tuesday's decline. The high range close sets the stage for a steady to higher opening on Friday. Stochastics and the RSI are neutral to bullish signaling that a short term low might be in or is near. Closes above Monday's high crossing at 1206.00 would temper the near term bearish outlook. If December renews the decline off this month's high, the 25% retracement level of the July-November rally crossing at 1169.37 is the next downside target. First resistance is Monday's high crossing at 1206.00. Second resistance is this month's high crossing at 1224.50. First support is last Tuesday's low crossing at 1175.20. Second support is the 25% retracement level of the July-November rally crossing at 1169.37.

Crude oil closed sharply higher on Wednesday as it rebounds off the 50% retracement level of the August-November rally crossing at 81.14. The high range close sets the stage for a steady to higher opening on Friday. Stochastics and the RSI are oversold and turning neutral to bullish signaling that sideways to higher prices are possible near term. Closes above the 20 day moving average crossing at 84.53 are needed to confirm that a short term low has been posted. If January extends this month's decline, the 62% retracement level of the August-November rally crossing at 79.24 is the next downside target. First resistance is today's high crossing at 83.95 Second resistance is the 20 day moving average crossing at 84.53. First support is Tuesday's low crossing at 80.28. Second support is the 62% retracement level of the August-November rally crossing at 79.24.

Natural gas closed lower due to profit taking on Wednesday as it consolidates some of the rally off last week's low. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term. If January extends the rally off October's low, the 38% retracement level of the June-October decline crossing at 4.654 is the next upside target. Closes below the 20 day moving average crossing at 4.196 are needed to confirm that a short term top has been posted. First resistance is today's high crossing at 4.515. Second resistance is the 38% retracement level of the June-October decline crossing at 4.654. First support is the 20 day moving average crossing at 4.196. Second support is this month's low crossing at 3.853.

Gold closed lower due to profit taking on Wednesday as it consolidates some of the rally off last week's low. The mid range close sets the stage for a steady opening on Friday. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near term. If December extends the rally off last week's low, the reaction high crossing at 1388.10 is the next upside target. If December renews this month's decline, the reaction low crossing at 1315.60 is the next downside target. First resistance is Tuesday's high crossing at 1382.90. Second resistance is the reaction high crossing at 1388.10. First support is last Tuesday's low crossing at 1329.00. Second support is the reaction low crossing at 1315.60.

The U.S. Dollar closed higher on Wednesday as it extends this month's rally. The high range close sets the stage for a steady to higher opening on Friday. Stochastics and the RSI are overbought, diverging but are bullish again signaling that sideways to higher prices are possible near term. If December extends this month's rally, the 38% retracement level of this year's decline crossing at 80.54 is the next upside target. Closes below the 20 day moving average crossing at 78.03 would confirm that a short term top has been posted. First resistance is today's high crossing at 80.09. Second resistance is the 38% retracement level of this year's decline crossing at 80.54. First support is the 20 day moving average crossing at 78.03. Second support is this month's low crossing at 75.24.


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Crude Oil Rallies Above 83 Despite Inventory Gains

Total crude oil and petroleum products stocks declined for the 4th week, by -0.26 mmb to 1106.15 mmb in the week ended November 19. Crude oil inventory unexpectedly gained +1.03 mmb, compared with consensus of a -1.03 mmb drop, to 358.63 mmb with stock rising in 3 out 5 PADDs. Cushing stock also rose +0.56 mmb to 33.63 mmb. Utilization rate climbed +1.5% to 85.5%.

Gasoline inventory increased +1.91 mmb to 209.59 mmb while that for distillate dipped -0.54 mmb to 158.25 mmb. Gasoline demand slipped -1.37% to 8.83M bpd. Imports and production rose +39.50% and +0.12% respectively. Distillate demand claimed +0.63% to 3.80M bpd. Both imports and production soared, by 49.43% and +1.46% respectively.

WTI crude oil jumped to as high as 83.05 after the report, despite stock builds in crude oil and gasoline. A Strong rebound in the stock markets was probably the main reason driving oil prices higher.

Here is a Comparison Between API and EIA Reports


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What's Surprising Me Most about Canadian Natural Gas

From guest analyst Keith Schaefer......

Western Canadian gas exports to the United States could be completely displaced into Northern California by....

1. Abundant, low cost US natural gas production,
2. And by several new gas pipelines in the US,

Says a new market study by Bentek, a US energy analysis company. Overall, Canadian gas exports to the US will drop 2 bcf/d over the next few years, almost 30%, and this impending loss of the northern California market builds upon the loss that western Canadian gas has in lower exports to the US northeast. Increased Canadian demand and declining Canadian supply will pick up some of the slack, but it won’t be enough to offset a significant loss of exports to the US market in the near term, they add.

Bentek’s report, titled “The Big Squeeze”, is a report that also outlines how fast growing production from the Marcellus shale in Pennsylvania is displacing Canadian gas to the lucrative Northeast US market, and how new pipeline capacity carrying low cost gas out of the Rocky Mountains is now set to displace much of Canadian gas to the US Midwest and lucrative California markets.

“What we outlined in our study was complete displacement of Canadian gas into Northern California by the summer of 2014,” says Jack Weixel, Director of Energy Analysis for Bentek.
Last summer I wrote about how the new $6 billion Rockies Express pipeline, or REX, going from Colorado to Ohio, was displacing western Canadian gas production by almost 10%. Lately, US natural gas production from the Marcellus shale has also been displacing Canadian gas to the US Northeast. Canadian suppliers have been able to send more natural gas into the Midwest and Western US to help make up for that drop.

But Bentek says even that market is at risk, and Canadians could see this market get curtailed within the next two weeks, in early December 2010. That’s when low cost Rockies gas supply will start flowing east on the newly installedBison Pipeline. This will give Rockies producers an additional 0.5 Bcf/d (billion cubic feet per day) of capacity out of the Powder River basin in Wyoming. The Bison connects into the Northern Border Pipeline, which moves mostly western Canadian supply.

Weixel expects the Bison Pipeline to create stiff competition for Canadian gas. He says Canadian gas has to get cheaper to stay competitive. “They (Canadian gas producers) need to drop 14 cents (an mcf). Let’s say Rockies gas is $3.50/mcf - that means that AECO (the Canadian natural gas benchmark price out of Edmonton) needs to be priced $3.36 to be competitive in northern California,” says Weixel, adding that the breakeven price for certain Rockies gas producers in the Pinedale and Jonah tight sands plays is “well below $3 per mcf.”

Weixel expects net Canadian exports to drop 2 bcf/d through 2015, out of a total of 6.9 bcf/d now. But it’s not all gloomy for producers – and their shareholde“At the same time exports are declining, you’ve got Canadian demand growing, primarily from oilsands in the west and coal retirements in the east,” he says. “You’ve also got production slipping from conventional gas plays in Alberta. So there is a tightening supply demand balance.

“Traditionally that would lend itself to gas prices getting stronger. But we believe that due to the drop in exports, that there will be just as much gas on hand in Canada as there is now. So if production drops 1.5 bcf/d but exports drop 2 bcf/d, they’re up half a “b” a day.
Canadian gas production is actually going up because of the unconventional plays in BC (read: MONTNEY), but Weixel says the gas rig count in Alberta dropped off a cliff this September, and is about half the number it was last year and about one quarter what it was in 2008.

What’s surprising to me is how little both the industry and investors appear to be concerned about this issue. The Calgary Herald ran a small story on this, and The Daily Oil Bulletin, which is ready by the industry only, ran a story (masthead, or lead story). There are thousands of high paying jobs at stake – mostly in Alberta but also in northern B.C.


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Bloomberg: Contango on Mideast Oil Disappears on China Diesel Squeeze

The 1 month old contango in Dubai oil, the benchmark grade of crude for Asia, has disappeared as a shortage of diesel in China puts a premium on the quickest deliveries of fuel. The December contract was 15 cents a barrel more expensive than January’s today, reversing a discount that’s been in place since July 2009, according to data from PVM Oil Associates, a London based broker.

A shortage of diesel in China is pushing up the premium for the fastest deliveries of oil as the nation curbs power use under a plan by Premier Wen Jiabao to cut electricity consumption per unit of gross domestic product by 20 percent in the five years through 2010. Stockpiles in the country, the world’s biggest energy user, fell for a seventh month in October, according to data from China Oil, Gas & Petrochemicals, a publication of the state owned Xinhua News Agency.

“China’s got to be short” of crude oil, said Alex Yap, an analyst at FACTS Global Energy in Singapore. “If they want to do any restocking from November to December, they’ll have to be importing a lot for the next couple of months.”

Oil imports dropped 30 percent to a 17 month low of 16.4 million metric tons in October, or about 3.9 million barrels a day, the General Administration of Customs said Nov. 22. Diesel inventories declined 11 percent to about 6.2 million tons in October, data from Xinhua News showed on Nov. 22. They were 11.5 million tons in February......Read the entire article.


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6 Natural Gas Stocks for 2011

Dan Dicker argues why he thinks 2011 will be the year for natural gas and reveals his top stock picks.



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Toby Shute: 3 Oil Deals Shaking the Market

This week, I've spotted at least three billion dollar oil deals that should be of interest to investors (all this as of Tuesday!). Combined with other activity in recent weeks, this suggests that there's plenty more M&A mayhem to come as we approach the end of the year.

A big splash in the Gulf
First off, Energy XXI (Nasdaq: EXXI) agreed to pick up a bunch of ExxonMobil's (XOM) shallow water Gulf of Mexico properties for $1 billion. This follows similar moves by Apache (APA), which grabbed Devon Energy's (DVN) shallow Gulf assets for an identical sum, and McMoRan Exploration (NYSE: MMR), which picked up the pieces from Gulf dropout Plains Exploration & Production (PXP).

Energy XXI is picking up 66 million barrels of oil equivalent (Boe) of proved and probable reserves, and 20,000 Boe per day of production. The cash flow multiple paid is 3.2. Apache got more reserves with its purchase (83 million boe), slightly less production (19,000 boe/d), and paid 3.7 times estimated cash flow. In both cases, oil and natural gas production is split roughly 50/50, so I assume the lower Energy XXI cash flow multiple is largely a reflection of higher oil prices. Any way you slice it, the purchase price looks reasonable.

With this purchase, Energy XXI becomes the third largest oil producer on the Gulf of Mexico shelf, leapfrogging W&T Offshore (WTI) in terms of reserves, and both McMoRan and Stone Energy (SGY) in terms of production. The assets acquired have the potential to deliver around 720 million Boe at a development cost of around $15 per barrel.

That would be a really compelling figure, if a large component of that total resource potential was oil. The potential oil mix, surprisingly, is only around 10%, however, alongside 3.9 trillion cubic feet of gas. So the big upside appears to be in deep and ultradeep gas prospects, such as the ones Energy XXI is exploring in partnership with McMoRan elsewhere on the Gulf of Mexico shelf.

Incidentally, Exxon walked away from one of these ultradeep drilling projects a few years ago. This week's sale confirms that the company lacks an appetite for this activity. Given the likely difficulties in securing future permits to drill these extremely high-pressure wells, I can't really blame it. I'm a decided fan of wildcat drilling in the Gulf, but my preference is for companies sizing their bets more conservatively.

Yet another Bakken buy
Last week we saw Williams (WMB) make a $925 million purchase in prime Bakken territory up in North Dakota. This week, Hess (HES) edges it out with a $1.05 billion buy of privately held TRZ Energy. This follows closely on the heels of the company's acquisition of American Oil & Gas (AEZ) earlier this year.

The 167,000 acres acquired in this latest deal bring 4,400 barrels of daily production to the table. That's a pretty massive $238,600 per flowing barrel purchase price. At under $6,300 per acre, though, this purchase comes at a discount to those executed by Williams and Enerplus Resources Fund (NYSE: ERF). From what I can piece together, TRZ is active in Dunn and Williams County. You may recall that Dunn County is the location of Kodiak Oil & Gas' (AMEX: KOG) core development area. This should be very prospective acreage, suggesting that Hess may have gotten a great deal here.

Another Asian oil sands suitor
Over the past year or two, one of the most active players in the Canadian oil sands has been China. PetroChina (PTR) took a big stake in a pair of Athabasca Oil Sands' projects last September. More recently, Sinopec (SHI) snapped up ConocoPhillips' (COP) 9% stake in Syncrude, and a Chinese sovereign wealth fund snapped up a stake in some Penn West Energy Trust (NYSE: PWE) properties.

Showing that China isn't the only one salivating over the security of long term oil sands supply, Thai energy company PTTEP has also stepped forward. The company is picking up 40% of Statoil's (STO) Kai Kos Dehseh oil sands project for $2.3 billion. The entry looks low-risk, as first production is slated for early 2011.

Thanks to heady oil prices, the oil sands have made a roaring comeback since the dark days of 2008. As long as you believe that the world economy will continue to support $70 plus oil prices, the oil sands are indeed an interesting place for your money. Cenovus Energy (CVE) continues to be my favorite operator in that realm.


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Phil Flynn: Happy Thanksgiving!

Well I guess we have one thing to be thankful for this Thanksgiving, oil prices are coming back down. All right it’s something and it was hard to find that silver lining especially after the week that we have had. It seems the world has gone crazy and there are new risks around every corner and these risks have conspired to bring oil prices back down.

Now can you enjoy your turkey? It was only weeks ago that oil bulls were basking in the intoxication of the Fed’s Quantitative Easing the sequel. The oil market topped $88.00 a barrel, it was a suckers rally as the market felt confident that all was well as the Fed had the markets' back. What was there to worry about? Tell after the Fed minutes we find out there is plenty to be worried about. The Fed’s grim economic outlook and a sense that perhaps some members of the Fed are questioning fed policy, have helped reduce some oil trader’s optimism about QE2 inspired oil demand.

The Fed lowered its forecast for 2010 GDP down to 2.4 to 2.5% from their previous estimate of 3 to 3.5%. For 2011 they expect GDP between 3% and 3.6%, down from 3.5% to 4.2% previously. As far as 2012 when the market expects rates will finally increse GDP projection is little changed while the new 2013 projection is put at 3.5-to-4.6%. The Fed also downgraded expectations for the unemployment rate which were raised for 2011 to a rate, 8.9% to 9.1% is expected. In 2013, the jobless rate is still seen between 6.9% and 7.4%.

What’s even more of a concern is the members of the Fed may not be on board with all of the printing of money. The Fed Minutes said that participants......Read the entire article.


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Crude Oil Technical Outlook For Wednesday Morning Nov. 24th

Crude oil was higher due to short covering overnight as it consolidates above the 50% retracement level of the August-November rally crossing at 81.14. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term.

If January extends the aforementioned decline, the 62% retracement level of the August-November rally crossing at 79.24 is the next downside target. Closes above the 20 day moving average crossing at 84.41 would confirm that a short term low has been posted.

First resistance is the 10 day moving average crossing at 83.16
Second resistance is the 20 day moving average crossing at 84.41

Crude oil pivot point for Wednesday morning is 81.21

First support is Tuesday's low crossing at 80.28
Second support is the 62% retracement level of the August-November rally crossing at 78.56


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New Video - It's more important to the market than Ireland, Greece, Portugal, and Spain Combined

It's more important to the market than Ireland, Greece, Portugal, and Spain combined

The trials and tribulations of these four countries (that have run up huge deficits) have been well known for quite some time. What is more important in my opinion is not the size of the debt, which is staggering, but rather what is going on with market perception.

Market perception trumps everything else out there. Market perception trumps market fundamentals every time. Market perception is the one card that the government cannot control. It is the card that can potentially give the individual trader an edge.

So what is market perception? Well, have you ever noticed that when some big world event happens, or a new "hot" IPO hits the markets, traders expect that market to go in the talked about direction and typically it does. What doesn't get talked about is how the market then corrects itself and the technicals really come into play.

The only real way to avoid the trap is through the use of technical analysis, or in the case of MarketClub, our "Trade Triangle" technology. This technology doesn't read the newspapers, doesn't watch cable news, and is independent of everything else except the market itself.

What is the most important thing to most investors? I would have to say it is the bottom line. If you're not making money in the market, then you're doing something wrong. Maybe you're paying more attention to the talking heads on cable, or to the nightly news, but you're not really paying attention to market perception.

I was lucky enough when I began my career to learn about technical analysis very early on. I said to myself, when it can be this easy there must be something more that I'm missing. It was then that I made the mistake of looking at all these other so called tools like fundamentals, earnings reports, etc. You name it, I looked at it.

One day I finally got smart and realized that I had already found the "true gold" in trading by using technical analysis.

I was just watching some talking head author on TV and they were saying that technical analysis is so 1920's and old technology. Of course, the person who was saying that was looking to sell copies of their book.

I said to myself, boy oh boy, not to look at technical analysis, which is like the DNA of the market, is a huge mistake. I can see people going out and buying this author's book and being led down the wrong path. I will not name the book as readers of this gobbledygook are going to spin their wheels only to find that it really doesn't work.

Let's keep things simple. That is the secret to successful trading.

At MarketClub we tend to look at the market in a very simple fashion. Let me explain; the market can only do three things: it can go up, it can go down, and it can go sideways. In life there are very few things that you can simplify as easily as that.

So using MarketClub's "Trade Triangles" you are able to determine when the market is going up, in which case you want to be long, and when the market's going down, in which case we want to be short or out of the market.

Now of course we do filter the "Trade Triangles" of MarketClub to help avoid trading losses. With any kind of trading or investing program the risk of loss is always there. The key to success is how you manage those losses. Are the losses small enough as to not bite into your capital in a major way?

Again, when you're looking at market fundamentals or other ways to trade, they really don't tell you when to get out. Obvious examples of this would be the Enron scandal or the recent GM debacle that took unwary investors to the poor house.

But it's hard to fake a market saying everything is great, when the market is heading south. So what is an investor to think? I believe you have to trust your eyes and the direction of the market. After all, that's what makes up your bottom line.

In today's video we're going to be looking at one or two markets and how the "Trade Triangles" are positioned right now. We are not predicting what's going to happen in the future. We are simply going to look at the purity of the "Trade Triangles" and how they can help investors with the most important market element of all, market perception.

As always our videos are free to view and there are no registration requirements.

So watch and enjoy "It's more important to the market than Ireland, Greece, Portugal, and Spain Combined"

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Hess Extends Bakken Footprint with TRZ Energy Deal

Hess has agreed to acquire 167,000 net acres in the Bakken oil shale play in North Dakota from TRZ Energy for $1.05 billion in cash. The properties being acquired are located near Hess' existing acreage and have current net production of approximately 4,400 boe/d.

"This acquisition strengthens our leading land position in the Bakken, leverages our operating capabilities and infrastructure and will contribute to future reserve and production growth," said Greg Hill, President of Worldwide Exploration and Production at Hess. The transaction has an effective date of October 1, 2010 and is expected to close by December 28, 2010.

Posted courtesy of Rigzone.Com

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Commodity Corner: Crude Oil Falls on Europe, Korea Concerns

Crude dropped for the third day Tuesday amid a backdrop of lingering concerns about the European debt crises and the two Koreas' shelling exchange.

Light, sweet crude futures fell 49 cents, settling at $81.25 a barrel on the New York Mercantile Exchange. Oil tumbled 0.6 percent Tuesday, a day after Ireland sought a financial bailout from the European Union and International Monetary Fund. German Chancellor Angela Merkel's comments that the euro is in an "exceptionally serious" situation added to the European debt fears, sending the dollar up against the euro. A stronger dollar curbs commodities' appeal for buyers with foreign currencies.

Escalating tensions between North and South Korea also contributed to decreasing prices. North and South Korea's exchange of artillery fire early Tuesday drove investors to seek refuge from riskier assets, according to analysts. The intraday range for crude prices was $80.28 to $82.10 Tuesday.

Natural gas for December delivery fell by less than a penny Tuesday to settle at $4.26 per thousand cubic feet. The decline came as forecasts showed milder weather in the U.S. The National Weather Service now expects normal to above normal temperatures in the Northeast for the next six to 10 days. The December contract for natural gas expires Wednesday, along with the release of this week's inventory report. It will be released a day earlier due to the U.S. Thanksgiving holiday on Thursday. Henry Hub natural gas peaked at $4.29 and bottomed out at $4.115.

Front month December gasoline also settled lower, falling 1.77 cents to end Tuesday's trading session at $2.13 a gallon. RBOB gasoline fluctuated between $2.10 and $2.15 Tuesday.


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