Crude Oil Trader

Low Volume Crude Oil Trading Day Ends with a Fractional Gain

2012-05-25T14:27:00.001-07:00

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Crude oil [July contract now] closed higher due to short covering on Friday as it bounces off the 62% retracement level of the 2011-2012 rally crossing at 90.26. The mid range close sets the stage for a steady opening when Tuesday's night session begins. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If July extends this month's decline, the 75% retracement level of the 2011-2012 rally crossing at 85.69 is the next downside target. Closes above the 20 day moving average crossing at 96.47 are needed to confirm that a low has been posted. First resistance is the 10 day moving average crossing at 92.35. Second resistance is the 20 day moving average crossing at 96.47. First support is Wednesday's low crossing at 89.28. Second support is the 75% retracement level of the 2011-2012 rally crossing at 85.69.

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Natural gas closed lower on Friday and below the 10 day moving average crossing at 2.613 signaling that a short term top might be in or is near. The low range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI are overbought and are turning neutral to bearish hinting that a short term top might be in or is near. Closes below the 20 day moving average crossing at 2.492 would signal that a short term top has been posted. If June extends the rally off last week's low, February's high crossing at 3.040 is the next upside target. First resistance is last Friday's high crossing at 2.759. Second resistance is February's high crossing at 3.040. First support is the 20 day moving average crossing at 2.492. Second support is the reaction low crossing at 2.387.

Every trader must see this video ....

Gold closed higher due to short covering on Friday. The low range close sets the stage for a steady to higher opening when Tuesday's night session begins trading. Stochastics and the RSI are turning bearish signaling sideways to lower prices are possible near term. If June renews the decline off February's high, the 38% retracement level of the 2008-2011 rally crossing at 1487.50 is the next downside target. Closes above the 20 day moving average crossing at 1597.00 are needed to confirm that a short term low has been posted. First resistance is the 20 day moving average crossing at 1597.00. Second resistance is this month's high crossing at 1672.30. First support is last Wednesday's low crossing at 1526.70. Second support is the 38% retracement level of the 2008-2011 rally crossing at 1487.50.

6 Things Successful Traders Have in Common

Billionaire T. Boone Pickens’ Favorite Energy Stock

2012-05-25T01:13:00.001-07:00

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By guest blogger Meena Krishnamsetty and our friends at Insider Monkey......

Billionaire T. Boone Pickens’ favorite energy stock is BP Plc (BP). This is the largest position in Pickens’ 13F portfolio which was disclosed to the SEC this afternoon. We think this is an excellent choice. The stock currently trades at $38 and yields 5%. This is a much better choice than long-term Treasuries.

Boone Pickens also like Encana and National Oilwell Varco. Pickens also disclosed a $11 million position in Chesapeake Energy (CHK).

Chesapeake Energy Corporation Releases Letter to Shareholders

2012-05-25T00:51:00.000-07:00

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The Board of Directors of Chesapeake Energy Corporation (NYSE:CHK) today released a letter to shareholders addressing certain issues recently raised by the Comptroller of the City of New York, John C. Liu, who oversees New York City pension funds that beneficially own less than 0.25% of Chesapeake’s common shares outstanding. The letter, which outlines numerous recent actions the Board has taken to enhance Chesapeake’s corporate governance and further strengthen its financial position, was issued in advance of the Company’s Annual Meeting of Shareholders to be held Friday, June 8, 2012. The full text of the letter follows:

From May 23, 2012....

Dear Fellow Shareholder:

You may have recently seen a letter from the Comptroller of the City of New York, John C. Liu, who oversees New York City pension funds that beneficially own less than 0.25% of Chesapeake’s common shares outstanding. While the Board of Directors appreciates constructive input from our shareholders, we wish to address issues raised by Mr. Liu and reiterate important steps the Board and Company have been taking as we approach our 2012 Annual Meeting of Shareholders.

CHESAPEAKE’S BOARD HAS IMPLEMENTED SIGNIFICANT COMPENSATION CHANGES AND IMPROVED GOVERNANCE WITH INTENTION TO SEPARATE POSITIONS OF CHAIRMAN AND CEO

Click here to read the entire letter to CHK Shareholders

This should create some controversy, when is the best time of day to profit?

Natural Gas Rig Count Briefly Drops Below 600

2012-05-24T14:17:00.000-07:00

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The natural gas rotary rig count, as reported by Baker Hughes Incorporated, rose by 2 this week to 600, after falling to a 10 year low of 598 last week. After increasing modestly to 936 active rigs in the fall of 2011, the natural gas rig count has dropped sharply. The oil rig count, currently at 1,382, has generally risen steadily since 2009, largely in response to increasing crude oil prices.

Natural gas rigs are currently down about 31 percent from their level at the same time last year, while oil rigs have risen by 45 percent over the same period. However, increased productivity from shale gas formations (generated by horizontal drilling and hydraulic fracturing) and rising associated production from expanding oil directed development activity have helped maintain robust natural gas production.

Oil and Natural Gas Rigs, 2002 - 2012

number of rigs

Source: Baker Hughes Incorporated

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Has Crude Oil Found Support at 90.26? How Indicators Say......

2012-05-24T13:59:00.000-07:00

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Crude Oil

Crude oil [July contract now] closed higher due to short covering on Thursday as it bounces off the 62% retracement level of the 2011-2012 rally crossing at 90.26. The mid range close sets the stage for a steady opening when Friday's night session begins. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If July extends this month's decline, the 75% retracement level of the 2011-2012 rally crossing at 85.69 is the next downside target. Closes above the 20 day moving average crossing at 97.19 are needed to confirm that a low has been posted. First resistance is the 10 day moving average crossing at 92.91. Second resistance is the 20 day moving average crossing at 97.19. First support is Wednesday's low crossing at 89.28. Second support is the 75% retracement level of the 2011-2012 rally crossing at 85.69.

Monthly Long Term Trend = Bearish
Weekly Intermediate Term Trend = Bearish
Daily Short Term Trend = Bearish

Natural Gas

Natural gas [still June contract] closed lower on Thursday as it extends this week's trading range. The low range close sets the stage for a steady to lower opening on Friday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term. If June extends the rally off last week's low, February's high crossing at 3.040 is the next upside target. Closes below the 20 day moving average crossing at 2.474 would signal that a short term top has been posted. First resistance is last Friday's high crossing at 2.759. Second resistance is February's high crossing at 3.040. First support is the 10 day moving average crossing at 2.608. Second support is the 20 day moving average crossing at 2.474.

With a Trade Triangle Analysis Score of -90, this market is in a strong trend to the downside. Long term, intermediate term, and short term traders are in short positions in crude oil with appropriate money management stops.

GOLD

Gold closed higher [June contract] due to short covering on Thursday. The low range close sets the stage for a steady to lower opening when Friday's night session begins trading. Stochastics and the RSI are turning bearish signaling sideways to lower prices are possible near term. If June renews the decline off February's high, the 38% retracement level of the 2008-2011 rally crossing at 1487.50 is the next downside target. Closes above the 20 day moving average crossing at 1601.70 are needed to confirm that a short term low has been posted. First resistance is the 20 day moving average crossing at 1601.70. Second resistance is this month's high crossing at 1672.30. First support is last Wednesday's low crossing at 1526.70. Second support is the 38% retracement level of the 2008-2011 rally crossing at 1487.50.

With a Trade Triangle Analysis Score of -100, the gold market is in a strong downtrend. Long term, intermediate term, and short term traders are in short positions in gold with appropriate money management stops.

Monthly Long Term Trend = Bearish
Weekly Intermediate Term Trend = Bearish
Daily Short Term Trend = Bearish

E-Minis Unfair Advantage....Have You Watch This Yet?

Video: Horizontal Drilling Boosts Pennsylvania’s Natural Gas Production

2012-05-24T07:25:00.001-07:00

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Between 2009 and 2011, Pennsylvania's natural gas production more than quadrupled due to expanded horizontal drilling combined with hydraulic fracturing. This drilling activity, which is concentrated in shale formations that cover a broad swath of the state, mirrors trends seen in the Barnett shale formation in Texas.

The animation illustrates Pennsylvania's relatively recent transition from conventional vertical wells (black diamonds) to horizontal wells (red diamonds), drilled mostly in sections of the Marcellus, Utica, and Geneseo/Burket shale formations located in the northeast and southwest portions of the state. The animation also shows that as horizontal drilling increased, the number of vertical wells—which are typically less productive—fell, resulting in an overall decline in the state's new well count.

Historically, natural gas exploration and development activity in Pennsylvania was relatively steady, with operators drilling a few thousand conventional (vertical) wells annually. Prior to 2009, these wells produced about 400 to 500 million cubic feet per day of natural gas. With the shift to and increase in horizontal wells, however, Pennsylvania's natural gas production more than quadrupled since 2009, averaging nearly 3.5 billion cubic feet per day in 2011. Natural gas wells accounted for virtually all (99%) of the horizontal wells started over this period.

Source: U.S. Energy Information Administration (2005-2010); Pennsylvania Department of Environmental Protection (2011).

Drilling programs in Pennsylvania's shale formations, like those in other, more established plays such as the Barnett and Eagle Ford in Texas, are migrating to more liquids-rich areas due to the price premium of crude oil and natural gas liquids. The effect of low natural gas prices is apparent in Pennsylvania's 2012 well count for the first third of the year. From January through April, drilling began on 618 new natural gas wells; over 700 new natural gas wells were started over the same period in 2011. In contrast, 263 new oil and "combination" (oil and natural gas) wells were started in Pennsylvania from January through April 2012, well above the 164 new wells that began drilling during the corresponding period in 2011.

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Crude Oil Charts Collapse Including Trades Below the $90 Level

2012-05-23T16:47:00.000-07:00

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Crude oil closed lower on Wednesday and below the 62% retracement level of the 2011-2012 rally crossing at 90.26. The mid range close sets the stage for a steady opening when Thursday's night session begins. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If July extends this month's decline, the 75% retracement level of the 2011-2012 rally crossing at 85.69 is the next downside target. Closes above the 20 day moving average crossing at 97.93 are needed to confirm that a low has been posted. First resistance is the 10 day moving average crossing at 93.63. Second resistance is the 20 day moving average crossing at 97.93. First support is today's low crossing at 89.28. Second support is the 75% retracement level of the 2011-2012 rally crossing at 85.69.

Natural gas closed higher on Wednesday and the high range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term. If June extends the rally off last week's low, February's high crossing at 3.040 is the next upside target. Closes below the 20 day moving average crossing at 2.448 would signal that a short term top has been posted. First resistance is last Friday's high crossing at 2.759. Second resistance is February's high crossing at 3.040. First support is the 10 day moving average crossing at 2.593. Second support is the 20 day moving average crossing at 2.448.

Gold closed lower due to profit taking on Wednesday. The high range close sets the stage for a steady to higher opening when Thursday's night session begins trading. Stochastics and the RSI are neutral to bullish signaling a low might be in or is near. Closes above the 20 day moving average crossing at 1607.60 are needed to confirm that a short term low has been posted. If June renews the decline off February's high, the 38% retracement level of the 2008-2011 rally crossing at 1487.50 is the next downside target. First resistance is the 20 day moving average crossing at 1607.60. Second resistance is this month's high crossing at 1672.30. First support is last Wednesday's low crossing at 1526.70. Second support is the 38% retracement level of the 2008-2011 rally crossing at 1487.50.

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Gold and Silver Long Term Signal

2012-05-23T06:59:00.000-07:00

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Long time readers know that we have been and remain bullish on gold and gold stocks in the longer term. However, the reasons why I believe gold and silver will perform well in the longer term are a bit different than what many economists and pundits are expecting.

I am a contrarian by nature. I generally try to do the opposite of the crowd in every situation I find myself regardless of whether I am in a movie theater or trading options. Before getting into the gold and gold miners analysis, I thought I would explain my position publicly to readers. I do not consider myself an expert economist, but I try to read those who many consider to be experts looking for similarities in their viewpoints and expectations.

The herd mentality exists in financial markets and a similar behavior exists among economists. Most economists in the mainstream media today tend to be Keynesians or neo-classical economists. Both viewpoints are generally accepted as the correct interpretation of economic and monetary policies by academia.

However, the academic world can actually reduce open thought through ridicule and persecution. In the world of academia the herd is right, until someone proves that they are wrong using logic based reasoning.

Very similar to political ideologies, economic ideologies are deeply rooted. Paul Krugman is a great example of Keynesian economist. Like it or not, the majority of economists believe his views are correct regardless of whether they are based on fact, history, or dare I say “common sense.”

This leads me to the reason why precious metals and commodities in general may be approaching a major bottom and the potential for a monster rally. The reasoning stems from the fact that across the world central bankers generally share the same views as Paul Krugman. They believe that the modern finance system does not need gold and that fiat currency is the answer even though history argues in their face across multiple millennia.

Most economists and financial pundits believe that sovereign debt is going to bring down the economy and they may be correct. Many believe that the debt will unleash a massive deflationary spiral that will consume fiat valuations, specifically on risk assets and debt obligations.

I do not necessarily disagree that this is a likely outcome, but what concerns me is the number of people that believe this is true. This is the herd’s idea and as I have said many times before the herd is rarely right. This time may be different, although it rarely is. For inquiring minds I offer a rather different potentiality.

What if the debt crisis causes a totally different outcome that very few economists envision? What if they follow Dr. Krugman’s ideas and create massive amounts of debt to stimulate the economy while printing vast quantities of fiat money to prop up failing financial institutions? Clearly increasing debt levels and debasing the currency do not imply a long term positive scenario.

Central banks do not have a strong track record when it comes to reducing liquidity or increasing liquidity at the appropriate times. Thus these actions are likely to facilitate some sort of crisis in the future whether it is a result of runaway deflation or inflation.

I believe that should a deflationary crisis caused by massive debt levels and diminishing economic strength present itself, central bankers around the world will behave exactly the same way. They will act simultaneously and through dovish monetary policy central bankers will flood the world with massive sums of freshly printed fiat currency with the intent to print away issues with a liquidity induced risk-on orgy.

Should that be their ultimate choice, risk assets will rally sharply higher initially. Paper assets like stocks will produce huge gains in a short period of time while supposedly safe assets such as Treasuries would likely arrive at negative interest rates across the yield curve in nominal terms. The next phase is the scary part and why I am bullish long term of precious metals specifically.

The devaluation of fiat currencies simultaneously around the world will result in a monster economic crash when the masses realize that the majority of the major worldwide currencies are becoming worth less and less. The resulting crash would be caused by the opposite force of runaway inflation while the herd mentality that anticipates a deflationary debt spiral espoused by most experts and pundits would be proven materially false.

Under those circumstances, precious metals will be the true safe haven. Gold and silver will prove to be a true store of wealth that they have been for centuries. So many so-called experts fail to recognize that gold and silver are currencies. Yes they have industrial uses, but gold and silver represent the last unequivocal bastion of wealth preservation against the constant debasement procured by central bankers and their minions.

Under the scenario whereby central bankers flood financial markets with cheap, freshly printed fiat currency one would expect other essential commodities such as oil to also perform well. Furthermore agricultural based commodities would also flourish under those economic conditions. Investors would be in much better fiscal condition owning things that they could hold in their hands versus stocks or bonds.

I posit this potentiality not to say that this is exactly what is going to happen, but to challenge readers to open their minds. The crowd is usually wrong. The central bankers and most economists generally share the same viewpoints and their behavior is literally a giant group think.

Is it possible that they are a herd which ultimately will be proven wrong? Will the herd mentality of economists and central bankers cause a massive currency crisis as they attempt to stem the tide of a deflationary debt crisis?

The two possible outcomes go hand in hand. I do not know what is going to happen, but neither outcome in the longer-term is especially optimistic. Should either scenario come to pass, the human condition will likely be threatened by a decrease in the standard of living across multiple developed countries and ultimately the threat of revolution and military action on a scale not seen in several decades could eventuate.

Clearly I have simplified the issues at hand presently for ease of reading, but the ultimate endgame will likely be one or a combination of both a debt crisis and a currency crisis. They will likely occur in close proximity to one other in terms of time, but the precise outcome will likely be different than what is commonly expected.

Regardless of which scenario occurs, precious metals will eventually be sought for their protection against the constant devaluation of fiat currencies by central banks around the world. For this reason, I remain a long term precious metals bull. With that said, why don’t we take a look at the recent price action in gold, silver, and gold mining stocks shown below.

A lot of writers have stated that gold has bottomed. I am not totally convinced, however I do believe that gold is in a bottoming process. For me to get completely in my gold bull suit I would need to see price action exceed the key resistance trend line shown below.

Gold Futures Contract Daily Chart

As can be seen above, until we see price push through resistance I will remain cautious. I would also point out that the last two times gold found bottoms near current prices the bottom forming process took several weeks to complete.

I do not expect for gold to form a V shaped reversal. In fact, lower prices in the short term would help drive the bullish case for the longer term. Bottoms take weeks to form and can be very dangerous trading environments where active traders get chopped around.

Silver is very similar to gold in that it appears to have formed the beginning of a possible bottom. Bottoms are generally not formed in one day. During the recent selloff, silver showed relative strength against gold. It is important to acknowledge that silver has yet to test the key lows that should offer support.

Because of this divergence in these two precious metals, I continue to believe that gold may see more downside again before a much stronger rally begins to take hold. Similar to gold, the descending trend line offers a great resistance level where traders can flip from being short-term bearish to longer-term bullish if the resistance line is penetrated. If we see silver carve out multiple daily closes above the resistance trend line paired with strong volume, I would anticipate that a bottom has formed and silver prices will have an upward bias. The daily chart of silver is shown below.

Silver Futures Contract Daily Chart

As expected, the gold miners have shown relative strength recently. The miners were just absolutely massacred during the recent sell off in equities and precious metals. However, gold miners similar to precious metals have a major descending trend line which they have already tested today. If the gold miners can push through resistance a large scale rally could play out. The daily chart of gold miners is shown below.

Gold Miners (GDX) Daily Chart

In addition, if readers look at a long term GDX price range that dates back to the 2009 lows the recent pullback is almost precisely a 0.50% Fibonacci Retracement. Similar to gold and silver, I would expect to see the gold miners pull back a bit here before pushing through major resistance. We may be setting up for a possible major bottom in precious metals and gold miners in the near future. Only time will tell.

In closing, remember to keep an open mind with regards to the future. The more often you hear the same message coming from financial pundits and experts, the more cynical you should become. Both potential scenarios will likely not end well. The question is whether the reason for the crash is deflation, inflation, or a combination of both scenarios. Regardless of the outcome, the long term future for precious metals remains quite bright.

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Crude Oil Closes Near 2012 Low on Tuesday

2012-05-22T16:21:00.000-07:00

This should create some controversy, when is the best time of day to profit?

Crude oil prices dropped near their lows for the year following warnings of a “severe recession” in Europe and an apparent easing of tensions over Iran’s nuclear program.

Benchmark U.S. crude on Tuesday lost 91 cents to end the day at $91.66 per barrel in New York while Brent crude fell by 40 cents to end at $108.41 per barrel in London. Both contracts hit a low for 2012 on Friday at $91.48 and $107.14, respectively.

Oil has declined almost every day this month as elections in Greece and France threatened existing plans to fix the eurozone economy A top economist for the Organization for Economic Cooperation and Development warned Tuesday that the eurozone could fall into recession this year if leaders fail to stimulate the economy. .

If that happens, it would stunt growth in world oil demand at a time when supplies are expanding.

Saudi Arabia, Iraq and Libya are producing and exporting more oil this year. And analysts say Iran’s oil exports could keep flowing if it lets international inspectors into its nuclear facilities as part of a new deal announced Tuesday.

Western leaders fear Iran is building a nuclear weapon. They’ve been trying to cut off Iran’s oil exports this year to pressure the country to allow in nuclear inspectors. Many nations already have stopped buying Iranian crude and Europe is expected to embargo all oil imports from Iran in July.

Iran says its nuclear program is for peaceful purposes only, but it so far has barred independent inspectors. If it allows them in, Europe may reward Iran by canceling the embargo, said Michael Lynch, president of Strategic Energy & Economic Research.

“If they don’t end it, it could be significantly delayed,” Lynch said.

Fears of a protracted standoff with Iran had helped push benchmark crude near $110 per barrel in February. Prices have since fallen below levels of early November, when the United Nations first warned of a potential nuclear threat from Iran.

Uninterrupted Iranian exports could boost world oil supplies to an average of 89.15 million barrels per day, according to the latest projections from the Energy Information Administration. That would be more than enough to meet world demand.

At the pump, U.S. gasoline prices fell nearly a penny to $3.68 per gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded has dropped by 25.6 cents since peaking this year in early April.

In other futures trading, natural gas added 9.8 cents, up 4 percent, to finish at $2.707 per 1,000 cubic feet. Natural gas prices have jumped by 42 percent since hitting a 10 year low on April 19 as supplies declined. Weather forecasters also predicted a toasty Memorial Day weekend across much of the country, which implies that people will crank up their air conditioners and power plants will burn more natural gas for electricity.

Heating oil and wholesale gasoline were both flat, ending the day at $2.8614 and $2.937 per gallon, respectively.

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Can the Stock Market Reverse and Rally to Highs?

2012-05-22T09:46:00.000-07:00

Do the Bulls still stand a chance to make another run?

That is the question this weekend after we saw the 1340, 1322 pivots crashed right through following the “SP 500 Bear Case” weekend report on May 13th I sent to subscribers with a chart last weekend (May 13th SP 500 at 1353).

We ended the week with the SP 500 falling from 1353 to about 1292 and the US Dollar having rallied 13 of the past 15 days to the upside. We also have The Mclellan Oscillator at extreme oversold levels as in the November 2011 lows and close to the August 2011 lows. The Sentiment gauges are running at only 24% Bulls as opposed to the historic 39% averages, and the Percentage of NYSE listed stocks trading above the 50 day moving average plummeted to 12%. That is about as low as it has been during this bull market, other than last August when we hit 5%.

So that means that the sentiment/human behavioral ingredients are actually in place for a marked rally to the upside. What we examine this week is whether that can still happen and what type of Elliott Wave pattern would we need to see to validate it.

We can still make a case that this correction of 130 points from 1422 to 1292 (about 9.1% similar to many Bull market corrections since 2009 lows) is a wave 4 correction of waves 1-3. Wave 1-3 rallied in total from 1074-1422 and a 38% retracement of that entire cycle would put us right around 1291/92 pivots.

So below we have the chart that the Bulls would hang onto as possible for a dramatic recovery to new highs past 1422 and onward to 1454 or so. This needs to begin very shortly though and much below 1285 we can wipe this idea off the slate in my opinion.

So, last weekends Bear View is now a 50% probability and the Bullish count below is also 50%. The good news is I think we will know which one is taking control very early in the week. This is probably not a good time to place a big bet just yet in either direction, we are at an inflection point.

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Phil Flynn: Downgrade Dilemma

2012-05-22T07:19:00.000-07:00

E-Minis Unfair Advantage....Have You Watch This Yet?

The oil market wanted to believe that the worst was over for the global economy, bouncing back from a 6 month low but a downgrade of Japan means the market will have to struggle to find the lower end of our trading range. As the June contract trades its last, more drama will ensue as the market awaits talks with Iran and their nuclear program and perhaps a Japan downgrade won’t be enough to keep the oil down.

Oh Fitch, talk about the timing of you Japanese downgrade. Oil stated to fall resuming its massive retreat as Fitch lowered sovereign debt rating to A+ with a negative outlook. Oil traders reacted as the dollar rallied and demand expectations again began to fall. It appears that oil may not have found the absolute low of its trading range just yet.

Of course the offset to that will be worries surrounding Iran and the nuclear talks. The market has been hopeful that a conflict can be avoided. This comes after the US Senate keeps the pressure on by voting more sanctions on the sanction overwhelmed regime. Reuters News reported the U.S. Senate unanimously approved on Monday a package of new economic sanctions on Iran's oil sector just days ahead of a meeting in Baghdad between major world powers and Tehran.

The pressure became more apparent when Iran said that they would allow the International Atomic Energy agency to allow weapon inspectors into sites that are suspected to be producing materials needed to make a nuclear weapon. CBS and the AP reported that, “despite some differences, a deal has been reached with Iran that will allow the U.N. nuclear agency to restart a long-stalled probe into suspicions that Tehran has secretly worked on developing nuclear arms, the U.N. nuclear chief said Tuesday.

The news from International Atomic Energy Agency chief Yukiya Amano, who returned from Tehran on Tuesday, comes just a day before Iran and six world powers meet in Baghdad for negotiations and could present a significant turning point in the heated dispute over Iran's nuclear intentions. The six nations hope the talks will result in an agreement by the Islamic Republic to stop enriching uranium to a higher level that could be turned quickly into the fissile core of nuclear arms.”

Yet will oil stay optimistic if Iran at any point tries to limit what the inspectors can do? We have seen this cat and mouse game many times before not only with Iran, but the king of the cat and mouse, the late Saddam Hussein. While oil traders can remain optimistic can Israel?

The Wall Street Journal is asking whether some investors wagering on natural-gas prices are losing their spark. The Journal says that, “natural-gas prices have jumped as much as 44% since sinking to decade lows last month. Much of that rally had been powered by rising demand from utilities, which had taken advantage of the low prices by using more natural gas instead of coal. But the higher prices are making coal competitive once again. Coal prices are down 22% since the start of the year."

The Journal says that utilities are continuously fine-tuning how much coal and natural gas they're burning to generate electricity. In recent months, they've increasingly favored natural gas due to the steep drop in natural gas prices. Utilities keep the breakdown of their fuel use a trade secret. How utilities will respond to higher gas prices has spurred debate among investors. Some analysts and traders say the rally threatens to erode natural gas recent gains in market share as utilities switch back to coal, and that could limit any further price increases. A must read in the Journal Today!

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Warm Weather and Low Natural Gas Prices Dampen Spot Electricity Prices This Winter

2012-05-21T20:54:00.000-07:00

E-Minis Unfair Advantage....Have You Watch This Yet?

The combination of one of the warmest winters (November-March) in decades and low spot natural gas prices contributed to low wholesale electric prices at major market locations during the winter of 2011-2012 (see chart below). Warm weather kept electric system load low across the East Coast and helped dampen the need for coal fired generation. Natural gas generation was up significantly to take advantage of low natural gas prices. Reduced nuclear generation due to outages and reduced hydropower generation both served to moderate declining electricity prices in much of the country.

On peak, wholesale electricity prices generally ranged from $20-$50 per megawatt hour last winter, with some exceptions. Electricity prices dropped during the winter, especially starting in January, as spot natural gas prices neared their lowest levels in the past decade.

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Crude Oil Bulls Start the Week Higher, Bears Still Have the Advantage

2012-05-21T14:59:00.000-07:00

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Crude oil closed higher due to short covering on Monday as it consolidated some of this month's decline. The high range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If June extends this month's decline, the 62% retracement level of the 2011-2012 rally crossing at 89.90 is the next downside target. Closes above the 20 day moving average crossing at 98.88 are needed to confirm that a low has been posted. First resistance is the 10 day moving average crossing at 94.53. Second resistance is the 20 day moving average crossing at 98.88. First support is today's low crossing at 90.84. Second support is the 62% retracement level of the 2011-2012 rally crossing at 89.90.

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Natural gas closed lower due to profit taking on Monday as it consolidates some of the rally off April's low. The low range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term. If June extends the rally off last week's low, February's high crossing at 3.040 is the next upside target. Closes below the 20 day moving average crossing at 2.388 would signal that a short term top has been posted. First resistance is last Friday's high crossing at 2.759. Second resistance is February's high crossing at 3.040. First support is the 10 day moving average crossing at 2.535. Second support is the 20 day moving average crossing at 2.388.

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Gold closed slightly lower on Monday but remains above the 10 day moving average crossing at 1579.00. The mid-range close sets the stage for a steady opening on Tuesday. Stochastics and the RSI have turned bullish signaling a low might be in or is near. Closes above the 20 day moving average crossing at 1615.10 are needed to confirm that a short term low has been posted. If June renews the decline off February's high, the 38% retracement level of the 2008-2011 rally crossing at 1487.50 is the next downside target. First resistance is the 20 day moving average crossing at 1615.10. Second resistance is this month's high crossing at 1672.30. First support is last Wednesday's low crossing at 1526.70. Second support is the 38% retracement level of the 2008-2011 rally crossing at 1487.50.

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Saudi Arabia Edges Out Russia as the Biggest Oil Producer

2012-05-20T20:16:00.000-07:00

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Saudi Arabia boosted crude production close to a 31 year high in March, overtaking Russia as the world’s largest oil producer for the first time in six years, according to the Joint Organization Data Initiative.

Saudi crude exports rose 3 percent in March, reaching the highest level in five years as Iran cut shipments, according to government statistics posted today on the initiative’s website.

Saudi Arabia, OPEC’s largest producer, increased daily output to 9.923 million barrels in March, up 0.7 percent to the second highest level since at least 1980, according to the initiative. That topped output from Russia, which pumped 9.920 million barrels a day, for the first time since February 2006, according to the data.

The initiative, known as JODI, is supervised by the Riyadh based International Energy Forum and compiles data provided by member governments. The IEF is a group of nations accounting for more than 90 percent of global oil and natural gas supply and demand, established as a forum for producing and consuming countries to discuss energy security.....Read the entire article.

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Where is Gold, Natural Gas and Crude Oil Headed This Week

2012-05-20T09:54:00.000-07:00

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Is the gold rally for real or just a short covering bounce? CNBC's Sharon Epperson discusses the Friday's activity in the commodities markets and looks ahead to where crude oil and precious metals are likely headed next week.

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2012-05-20T09:23:00.002-07:00

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Natural Gas Consumption Reflects Shifting Sectoral Patterns

2012-05-19T20:18:00.000-07:00

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U.S. natural gas consumption since 1997 reflects shifting patterns. Total U.S. natural gas consumption rose 7% between 1997 and 2011, but this modest growth masks bigger changes in individual sectors. Electric power is now the largest natural gas consuming sector and it shows perhaps the greatest sensitivity to price changes. The graphics below highlight key factors that influence natural gas consumption.

The electric power sector has the flexibility to shift some amount of baseload power generation, much of which has traditionally been fueled by coal, to underutilized natural gas generators without requiring additional investments in infrastructure.

Natural gas consumption for power generation is expanding. An earlier Today in Energy article noted that consumption of natural gas for electric power (or "power burn") has exceeded natural gas consumption in the industrial sector since early 2009. The power sector added a significant amount of new natural gas fired generating capacity over the last decade, much of which was in the form of efficient combined cycle units.

For many years, while coal fired generation was less expensive, those natural gas fired combined cycle units were used at relatively low rates. Recently, with natural gas prices declining and coal prices rising, dispatching natural gas generators in some parts of the country has become increasingly competitive with running coal generators. Competition between natural gas and coal appeared first in the Southeast, where coal fired power was more expensive due to the cost of transporting coal over long distances.

In the industrial sector, natural gas consumption increased in 2010 and 2011, reversing a trend of declining consumption that lasted from the mid-1990s to 2009. Natural gas is used in the industrial sector and manufacturing subsector for process heating, steam generation, onsite electricity generation, space heating, and petrochemical processing.

The downward trend in natural gas prices has lowered the cost of a key input for some industries. However, the short term flexibility to take immediate advantage of low natural gas prices is limited in this sector, because many manufacturers that relied heavily on natural gas as fuel or feedstock closed down or moved abroad in the late 1990s and early 2000s in the face of rising natural gas prices. For various reasons, some of the remaining firms may switch fuel to natural gas, and others may never switch regardless of fuel costs, leaving a wide range of dependencies on natural gas prices (see Tables 10.15 and 10.21 from EIA's Manufacturing Energy Consumption Survey).

Domestic and global macroeconomic trends affect industrial activity, which is often tracked by industrial indices. However, some U.S. manufacturers (e.g., petrochemicals) that use natural gas derived feedstocks (e.g., ethane) are enjoying a competitive advantage while international competitors consume more expensive, oil derived feedstocks.

Residential and commercial consumption of natural gas is primarily for space heating, water heating, and cooking; the most influential short term factor for these sectors is weather (quantified here as heating degree-days).

The residential and commercial sectors have limited short-term flexibility to take advantage of inexpensive natural gas, as heating systems can be expensive to modify and are replaced infrequently. Over longer timescales, the number of households using natural gas for space heating has increased, for example, in the Northeast, households are switching their heating fuel from heating oil to natural gas. However, the increasing efficiency of home heating systems (lower average gas use per customer) masks some of the effect of the increasing number of natural gas customers, even when normalized for weather.

Seasonal patterns in natural gas consumption appear in all sectors. Colder winter weather means more natural gas consumption for space heating, and warmer summer weather leads to increased consumption in the power sector with increasing demand for air conditioning.

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ONG: Crude Oil Weekly Technical Outlook

2012-05-19T17:26:00.000-07:00

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Crude oil dropped further to as low as 90.93 last week and broke mentioned 92.52 support. Initial bias remains on the downside this week and further fall should be seen to 61.8% retracement of 74.95 to 100.55 at 88.55. Strong support is anticipated at this 88.55 fibonacci level to bring rebound. On the upside, above 94.16 minor resistance will turn bias neutral and bring recovery. But upside should be limited by 100.68 support turned resistance and bring another fall.

In the bigger picture, price actions from 114.84 are developing into a three wave consolidation pattern. And, the third leg should have already started at 110.55. Deeper fall should eventually be seen to 74.95 low and possibly below. Though, we'd likely see strong support from 64.23 cluster level, 61.8% retracement of 33.20 to 114.83 at 64.38 and bring another medium term rise. Hence we'll look for reversal signal below 74.95.

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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It's a Wrap....Energy Futures End The Week Down

2012-05-18T15:42:00.000-07:00

Make sure you understand the simple truth about trends.

The energy futures are down once again today and trading right near the lows of the trading week with crude oil down another $1.35 this Friday morning due to more pessimism about the European debt situation causing prices to be down around $5 dollars for the trading week from last Fridays closing price of 96.50 down around 4% for the week while unleaded gasoline for the June contract is higher by 150 points currently trading at 2.90 a gallon in a quiet trade so far in New York.

Heating oil futures are down slightly currently trading at 2.84 a gallon also sliding for the week around 1200 points from last Fridays close of 2.96 a gallon and in our opinion, like we have been stating in previous blogs, if you look back at 2010 when this problem came up for the first time crude oil prices plummeted on that news and then rebounded later in the year so prices are still relatively high if the situation gets worse but only time will tell.

Natural gas futures are sharply higher once again today up another 14 points in the June contract to seven week highs at 2.74 with renewed optimism that demand will come back into this market with the next major level of resistance around 2.90.

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Phil Flynn: Quantitative Conundrum

2012-05-18T10:00:00.000-07:00

10,000 Trades have viewed this video this morning.... Here is the simple truth about trends

Gold and silver soars and oil sinks in what can be best described as a quantitative easing conundrum. Many people were confused how gold might rally after briefly dipping in bear market territory after the dollar rallied for a record 14 days. The day after the Fed minutes showed that several Fed Officials would be open to more economic stimulus if the economy turned worse all of a sudden it seemed that indeed thinks look worse.

Against a backdrop of Europe coming apart at the seams somehow contraction in the Philly Fed Manufacturing Index and Leading Economic Indicators that are leading us in the wrong direction the odds of quantitative easing are rising Howard Packowitz at Dow Jones “The Wizard of Fed Fund Future Odds” showed that Fed funds futures traders now believe that the FOMC will wait two years or longer before it begins raising the funds rate.

Packowitz pointed out that trading volume heavier than usual for longer dated contracts as July 2014 fed funds price in a 40% chance for the Fed to boost the rate to 0.5% by then, down from a 44% chance at Wednesday's settlement. November '14 fed funds see 88% chance for a 0.5% rate, down from a 96% chance at Wednesday's settlement.

Yet while those odds rise the dollar rises as it is clear that it won’t just be the US that will have to come to the printing presses. The pressure on governments around the globe are clear in the currency differentials as the British Pound and Euro falls and yen rises. China and other markets may have to stimulate. Gold now is pricing in easing.

The Brent Crude WTI spread came in as Japan announced the restart of some nuke plants and the historic reversal of the Seaway pipeline is ready to begin!

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Crude Oil May Fall as Seaway May Prove Insufficient to Ease Glut

2012-05-18T07:29:00.000-07:00

Here is the simple truth about trends

Crude oil may decline next week on concern that the reversal of the Seaway Pipeline will not be enough to alleviate a record supply glut in the central U.S., a Bloomberg survey showed.

Nineteen of 34 analysts, or 56 percent, forecast oil will drop through May 25. Nine respondents, or 26 percent, predicted prices will rise and six estimated they will be little changed. Last week, 48 percent of surveyed analysts expected a decrease.

Enbridge Inc. (ENB) and Enterprise Products Partners LP (EPD) completed the pipeline reversal yesterday and plan to start shipping oil this weekend from Cushing, Oklahoma, the delivery point for West Texas Intermediate oil futures traded in New York, to the Gulf Coast. U.S. oil inventories rose to a 22 year high and Cushing stockpiles peaked in the week ended May 11 as domestic output increased, according to the Energy Department.....Read the entire Bloomberg article.

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Crude Oil Falls Below 50% Retracement Level, Gold Bounces on Short Covering

2012-05-17T18:27:00.000-07:00

Here is the simple truth about trends

Crude oil closed lower on Thursday extending this week's breakout below the 50% retracement level of the 2011-2012 rally crossing at 93.99. The low range close sets the stage for a steady to lower opening on Friday.

Stochastics and the RSI are oversold but remain bearish signaling that sideways to lower prices are possible near term. If June extends this month's decline, the 62% retracement level of the 2011-2012 rally crossing at 89.90 is the next downside target. Closes above the 20 day moving average crossing at 100.02 are needed to confirm that a low has been posted.

First resistance is the 10 day moving average crossing at 95.75. Second resistance is the 20 day moving average crossing at 100.02. First support is Wednesday's low crossing at 91.81. Second support is the 62% retracement level of the 2011-2012 rally crossing at 89.90.

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Natural gas closed lower due to light profit taking on Thursday. The mid range close sets the stage for a steady opening on Friday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term.

If June extends the rally off last week's low, the 25% retracement level of the 2011-2012 decline crossing at 2.757 is the next upside target. Closes below the 20 day moving average crossing at 2.327 would signal that a short term top has been posted.

First resistance is today's high crossing at 2.676. Second resistance is the 25% retracement level of the 2011-2012 decline crossing at 2.757. First support is the 10 day moving average crossing at 2.464. Second support is the 20 day moving average crossing at 2.327.

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Gold closed higher due to short covering on Thursday as it consolidates some of this month's decline. The high range close sets the stage for a steady to higher opening on Friday.

Stochastics and the RSI are oversold but remain neutral to bearish signaling sideways to lower prices are possible near term. If June extends the decline off February's high, the 38% retracement level of the 2008-2011 rally crossing at 1487.50 is the next downside target. Closes above the 20 day moving average crossing at 1619.60 are needed to confirm that a short term low has been posted.

First resistance is the 10 day moving average crossing at 1589.00. Second resistance is the 20 day moving average crossing at 1619.60. First support is Wednesday's low crossing at 1526.70. Second support is the 38% retracement level of the 2008-2011 rally crossing at 1487.50.

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Gold Bulls Continue to Get Bad News, Now it's Lack of Physical Demand

2012-05-17T07:29:00.000-07:00

Here is the simple truth about trends

Jon Nadler, senior analyst at Kitco.com, says the demand for physical gold has plummeted and smaller miners may need to alter their plans.

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King Dollar Dominates, Crude Oil and Gold Continues the Free Fall

2012-05-16T19:51:00.000-07:00

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Crude oil closed down $1.23 a barrel at $92.75 today. Prices closed near mid range today and hit a fresh 6 1/2 month low. The bears have the solid overall near term technical advantage. A stronger U.S. dollar index today was again bearish for the crude market.

Natural gas closed up 12 1/2 cents at $2.625 today. Prices closed near the session high again today and hit a fresh 10 week high. More short covering and bargain hunting buying were featured today. The bulls have upside near term technical momentum. The bears do still have the slight overall near term technical advantage, however.

The U.S. dollar index closed up 14 points at 81.52 today. Prices closed near mid range today and hit another fresh four month high. More safe haven buying of the greenback was seen today. Bulls have gained solid upside near term technical momentum and have the solid overall near term technical advantage.

Gold futures closed down $25.20 an ounce at $1,531.70 today. Prices closed nearer the session low today and hit a fresh 10 month low. The key “outside markets” were again in a bearish posture for gold today, as the U.S. dollar index was higher and the crude oil market was lower. Serious near term chart damage has been inflicted recently. Now, gold prices are nearing major psychological support at the $1,500.00 level.

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Petrobras Quarterly Profit Beats Estimates on Export Growth

2012-05-16T07:19:00.000-07:00

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Petroleo Brasileiro SA (PETR4), the world’s biggest oil producer in deep waters, said first quarter profit topped analysts’ expectations because of increased revenue from crude exports and higher fuel prices.

Net income dropped 16 percent to 9.2 billion reais ($4.6 billion), or 71 centavos a share, from 10.99 billion reais, or 84 centavos, a year earlier, Brazil’s state controlled producer said late yesterday. Per share profit beat the 64 centavo average of four analysts’ estimates compiled by Bloomberg.

Petrobras increased prices for gasoline and diesel by 10 percent and 2 percent, respectively, on Nov. 1. The first boost in more than three years reduced the discount to international prices. Oil exports rose 20 percent to 497,000 barrels a day after the company sold inventories it accumulated in late 2011, Petrobras said in a regulatory filing.

“The company’s increase in oil exports and its use of inventories at lower prices mainly explained the better than expected operating performance in the period,” Bradesco SA analysts led by Auro Rozenbaum said in a note to clients distributed today.

Read the entire Bloomberg article

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