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OIL: DICEY PATTERN
By The wave trading
* February 7, 2016
Monthly time frame:
• Oil must reclaim the 2009 low in order to at least allow an oversold rebound
• Below the 2009 low we have 2 support areas at 24.44 and 17.18 prior to the 1986 low at 9.75
• In the following monthly chart we can see that maybe Oil is forming a “Bullish” Falling Wedge
• If the 10 mma = 44.86 is reclaimed then the trend could shift from bearish to bullish
Weekly time frame (March future contract):
• Within the suggested wedge of the monthly time frame (Blue converging trend lines) there is a smaller one (Black converging trend lines)
• The pattern of the smaller wedge is quite tight hence a resolution should be imminent
• If the resolution is bullish I would expect a sharp move to the upside
• Above the upper black trend line we have R1 (10 wma) at 35,72; R2 (Blue upper trend line and 20 wma) at 41.46 then R3 (50 wma) at 50.45
• If the resolution is bearish we shall see if the lower trend lines hold
• Weekly oscillators are displaying a positive divergence of the RSI and MACD but a bullish signal cross of the MACD is needed in order to increase the odds of a tradable bottom
Daily time frame:
• At first sight it looks like the 3-wave up leg form the January low is a failure. Price has been rejected three times by the upper converging trend line and last Friday price has dropped back below the 10 dma and the 20 dma.
• The pattern is certainly dicey
• Now we have to pay attention to the trend line that connects the January 26 and February 3 lows. If the trend line holds a break out of the wedge would be possible while if it does not hold Oil will probably establish another lower low
• Daily oscillators are poised for higher prices ahead if the RSI(14) reclaims the 50 line given the MACD bullish signal cross.
60 minute time frame:
• Above I mentioned the critical significance of the trend line that connects the January 26 and February 3 lows. This trend line can belong to a bearish or a bullish pattern:
a) Bearish Pattern: Head & Shoulder with a measured target at 24
b) Bullish Pattern: Triangle with a measured target at 38
http://www.thewavetrading.com/oil-dicey-pattern/
• George.
Click on "In reply to", for Authors past commentaries.
Oil: Non-OPEC Production Declines
* February 5, 2016
Oil markets will continue to be buffeted by Russian overtures to OPEC suggesting a desire to orchestrate a production cut. Uncertainty over the Fed’s next move will keep markets on edge. Markets are rebalancing, nonetheless, and prices are bottoming.
Even though Russian oil production remains at post-Soviet highs, it has been declining slightly month-on-month since mid-2015, and started posting yoy declines in the fourth quarter.
In addition to Russia, other non-OPEC producers will see meaningful production losses this year. Noteworthy among this group are North Sea producers. Oil output in the North Sea took a turn lower in 2015Q4. We expect low prices will force production lower this year and next, in line with the EIA’s forecast of 2.75 mm b/d this year, or about 250 kb/d yoy.
Overall our commodity strategists expect non-OPEC oil (crude and condensates) production to fall yoy by close to 1.7 mm b/d in 2016. This is higher than the EIA’s estimated 640 kb/d production decline for non-OPEC. In our projection, we see sharply lower U.S. production – please see the next Insight, (Part II) Oil: Sharply Lower U.S. Output Expected.
http://blog.bcaresearch.com/oil-non-opec-production-declines
• George.
Click on "In reply to", for Authors past commentaries.
Peek Into Crude Oil Future Through Futures
* February 6, 2016
The following are futures positions of non-commercials as of February 2, 2016. Change is week-over-week.
Crude oil: After having ignored what would otherwise be a bearish inventory report in the prior two weeks, spot West Texas Intermediate crude this week succumbed to bad fundamentals. The spot lost 8.1 percent.
For the week ended January 29th, U.S. crude stocks jumped 7.8 million barrels, to a record 502.7 mb. This was preceded by an 8.4-mb build in the prior week and a four-mb build in the week before that. All in all, stocks have gone up by 20.2 mb in three weeks!
In the prior two weeks, between intra-day high and low, the WTI rallied 26 percent.
In normal circumstances, markets able to comfortably digest bad news should be viewed as bullish. Particularly so considering the persistent, months-long decline oil has suffered.
That said, oil’s rally coincided with persistent rumors surrounding talks of production cutbacks. Hard to decipher what was behind the rally: selling exhaustion (positive) or rumors (negative if they do not turn into reality).
Besides aggressive crude inventory build, most other items in this week’s EIA report were negative as well.
Gasoline stocks increased by 5.9 mb, to 254.4 mb. This was the 12th straight weekly increase – a fresh record (data goes back to 1990).
Crude imports rose by 647,000 barrels per day, to 8.26 mbpd – a seven-week high.
Refinery utilization fell by eight-tenths of a percent, to 86.6 – a 15-week low. Utilization peaked at 96.1 percent in the August 7th week.
In the meantime, crude production dropped by 7,000 bpd, to 9.21 mbpd – a five-week low. Production peaked at 9.61 mbpd in the June 5th week.
And distillate stocks declined by 777,000 barrels, to 159.7 mb. Three weeks ago, stocks (165.6 mb) were the highest since the January 21, 2011 week.
At least near-term, the line in the sand on spot WTI continues to be $34.50-$35, which already repelled a rally attempt last week.
Currently net long 191.6k, down 19.4k.
http://www.hedgopia.com/cot-peek-into-future-through-futures-29/
• George.
Click on "In reply to", for Authors past commentaries.
COT - Commitments of Traders in Crude Oil Markets Reports
* February 5, 2016
http://www.cotpricecharts.com/commitmentscurrent/index.php
• George.
Click on "In reply to", for previous Reports.
Peek Into Crude Oil Future Through Futures
* January 30, 2016
The following are futures positions of non-commercials as of January 26, 2016. Change is week-over-week.
Crude oil: The EIA report for the week of January 22nd was mixed at best and bearish at worst.
Crude production dropped by 14,000 barrels per day, to 9.22 million barrels per day. Last week was a 21-week high. Production peaked at 9.61 mbpd in the June 5th week.
Crude imports fell by 170,000 bpd, to 7.61 mbpd. In the past couple of weeks, imports have dropped by 579,000 mbpd.
Distillate stocks declined by 4.1 million barrels, to 160.5 million barrels. Two weeks ago, stocks (165.6 million barrels) were the highest since the January 21, 2011 week.
Now on to the negatives:
Refinery utilization fell by 3.2 percentage points, to 87.4 – a 14-week low. Utilization peaked at 96.1 percent in the August 7th week.
Gasoline stocks increased by 3.5 million barrels, to 248.5 million barrels. This was the 11th straight weekly increase, and at the highest since the March 2, 1990 week.
Even worse, crude stocks increased by 8.4 million barrels, to 494.9 million barrels – the highest ever (data goes back to 1982).
Spot West Texas Intermediate crude went on to rally 4.3 percent in the week. It was part fatigue – fatigue of going down – and part rumors of possible Russian willingness to discuss output cutbacks.
Later on Friday, talking to Bloomberg, Russian energy minister said Russia would participate in talks with both OPEC and non-OPEC nations that Venezuela has proposed for February. But there is no date and no confirmed meeting yet.
Saudi Arabia, by the way, continues to say it would continue to maintain its capital expenditures.
The Russians and the Saudis do not trust each other, with the former thinking the Saudis are in cahoots with the Americans and are out to get them. So we will see what comes out of these rumors.
For now, between the January 20th low and the 28th high, spot West Texas Intermediate crude rallied 26 percent. On Thursday, it rallied up to 34.82, before pulling back. Friday produced a doji. Getting past this resistance will be a sign the bulls are making progress. They have a tough task at hand.
Non-commercials continued to add this week, though ever so slightly. Two weeks ago, holdings were at the lowest since July 2012.
Currently net long 210.9k, up 17.5k.
http://www.hedgopia.com/cot-peek-into-future-through-futures-28/
• George.
Click on "In reply to", for Authors past commentaries.
COT - Commitments of Traders in Crude Oil Markets Reports
* January 29, 2016
http://www.cotpricecharts.com/commitmentscurrent/index.php
• George.
Click on "In reply to", for previous Reports.
Natural Gas is Starting to Lift Now
By MPTrader
* January 29, 2016
Although the spotlight in the energy complex is on Oil, rather than Natural Gas, the latter is starting to lift a bit towards a confrontation with very important resistance located between 2.44 and 2.62, which must be hurdled for Natural Gas to establish a significant multi-month bottom.
As long as the Jan 19 pullback low at 2.04 remains intact (7.63 UNG), I want to remain long United States Natural Gas (UNG).
https://www.mptrader.com/middayminute/
• George.
Click on "In reply to", for Authors past commentaries.
Martin Armstrong: Crude – Is it Over? Or Just Another Fake-Out?
* January 29, 2016
Crude has made a slight bounce, but it need desperately to close above $32.35 today just to pause. There is no change of a real reversal in trend here. Crude would need to closing above the $38.35 area just to hint that the low might be in place. Our timing targets are still pointing to this week/New Week. If this turns out to be a reaction high, then a rout to the downside may yet be in the cards. We have a Monthly Bearish coming into play at $36.65, $35.13, $33.30 and a key one at $30.10 followed by $28.25. So we would have to close above $36.65 to avoid a sell signal.
http://www.armstrongeconomics.com/archives/42708
• George.
Click on "In reply to", for Authors past commentaries.
Oil Shuts In A Well Fire In The Hole
By Greg Schnell
* January 28, 2016
All of us old enough to remember John Wayne as the actor in the Hellfighters movie based on Red Adair's career of extinguishing blowouts might add some bourbon in their coffee this morning. It would appear in the short term that the blowout in the price of oil might have limited the spillage at $27.56 on a $WTIC chart for the time being.
The chart below is the oil tracking ETF, (USO), which gives us an intraday view of the spot price. Today it made a higher high on the daily chart above the $9.29 level. Usually, commodities like to test their lows, so I wouldn't be surprised that we have to make at least one more rollover in the next 6 months to test this low. Whether the January 20th, 2016 low holds is another question.
Currently, the relative strength line has broken the downtrend, which is a first step in stabilizing the price. When oil continues to underperform the market, there are not many investors that want to enter a position.
The price could rise 60% and still be below today's 200 DMA reading! That is a lot of room. The down-sloping trendline shows the first resistance overhead. Above that, the gap at $10.50, the high at $11.42, and the gap at $12.00 - $12.50 are all meaningful targets.
The huge volume swell suggests some level of a blowout. It will take a few months before its under control, so this will still be swinging wildly until some stability between supply and demand is found.
For investing in the oil companies, please remember that they will be announcing their reserves in the upcoming months. In some cases, the corporate assets will be written down dramatically. Caution is warranted owning the companies until this reserves calculation is published for shareholders. Only the reservoirs where the oil can be pumped profitably at a calculated price which is definitely below $50 can be included. Whether they use the futures curve, the spot price, the 12-month historical average, or a blend of these, the numbers are at very low levels. Because the companies have to use independent appraisers, this is not a flexible situation. There are different ways to calculate the reserves, but some companies may have most of their reservoirs unprofitable. When the book value of the reserves plummets, the debt load the company carries becomes too high. They need to sell shares to raise money or struggle to avoid bankruptcy. Both of these outcomes are brutal at the current price of oil as the company shares have dropped in value.
While the higher high this morning is nice to see, it is a trading environment for the near future. I will be discussing oil stocks and oil in the Commodities Countdown webinar this afternoon at 5 EST. Click on this link to register. Commodities Countdown 20160128.
Good trading,
Greg Schnell, CMT
http://stockcharts.com/articles/dont_ignore_this_chart/2016/01/oil-shuts-in-a-well-fire-in-the-hole.html
• George.
Click on "In reply to", for Authors past commentaries.
Why Lower Gasoline Prices Are Not Stimulating Economy
By Tom McClellan
* January 27, 2016
Fed officials and financial news reporters are collectively wondering why the economy seems to be slowing down, even though lower oil and gasoline prices ought to be a stimulative factor. If consumers are spending less of their money on gasoline, then they ought to have more to spend on other stuff, or so goes the reasoning. So why is it not working?
The problem is one of magnitude, and most analysts fail to take the time to do the math. So at the risk of boring you with arithmetic, let’s look at some important numbers, with a bit of back-of-the-envelope math.
The EIA publishes data on consumption for a variety of energy products, including gasoline. In November 2015 for example (the most recent month for which there are data), Americans consumed gasoline at a rate of 358 million gallons per day. The 12-month average is 360 million gallons. That sounds like a really large number, but when you realize that there are roughly 322 million resident Americans, that works out to 1.11 gallons per day for every American.
The chart above shows the trend for that data. The high prices of just a couple of years ago sent people into dealerships to buy Priuses, Volts, Teslas, and other electrified cars to avoid paying high gasoline prices. But the falling prices for automobile fuel are making consumers eschew those more efficient choices, and consume more gasoline. They are also consuming more diesel, which is not part of these computations, but it is nevertheless a real factor.
Looking at the math, if the price of gasoline drops from $3.00 to $2.00 (round numbers to make the math easier), that means an extra $1.11 in your pocket every day, assuming you are the average man, woman, and child in America.
If you find a dollar on the sidewalk, pick it up and put it in your pocket, are you going to go out and adjust your spending patterns? Probably not. But if you found a dollar on the sidewalk every day for a month, or for several months, maybe you will start supersizing your Happy Meal, buying more Pokemon cards, or making other adjustments to your consumption. This is the point that former Fed Chairman Ben Bernanke made in his famous speech about dropping money from helicopters, a point he borrowed from Milton Friedman.
Aggregating all of those savings, a $1 drop in gasoline prices amounts to around $10.8 billion of supposed stimulus in the form of consumers keeping more of their own money. That’s $1 multiplied by an average of 360 million gallons per day, times 30 days in an average month. Now, $10.8 billion per month is a pretty big number, but it is nowhere near the $85 billion per month that the Fed was pumping into the banking system during QE3, for example.
Still, $10.8 billion per month ought to do something for stimulus, right? Yes, of course, but that is unless it gets eaten by monsters. Mwahh, hah hah!! The Robert Wood Johnson Foundation (RWJF) estimates that the average price of healthcare premia will rise by 12.56% in 2016, a figure way above the estimate of 5.8% per year as modeled by the Centers for Medicare and Medicaid Services for the 2014 to 2024 period.
The National Conference of State Legislatures estimates a US-wide cost for a “Silver” plan medical insurance for a 40-year-old non-smoker at $314 for 2015. So if we apply a 12.56% growth rate from RWJF, that amounts to a jump to $353, or $39/month. That pretty well eats up the $1.11 per day savings on gasoline.
Ergo, the stimulus of lower gasoline prices has been eaten by monsters.
One other monster eating the gasoline stimulus is that the federal government is now soaking up 18.1% of GDP in the form of federal taxes. Going above 18% has a proven track record of pushing the U.S. into a recession. So the bottom line is that whatever stimuli the lower prices of gasoline are giving us are getting swallowed by darker forces. And the magnitude of the savings is just not enough to outweigh those stronger forces. It would not even be enough if gasoline was free. And that’s the big takeaway message.
Tom McClellan
http://www.mcoscillator.com/learning_center/weekly_chart/why_lower_gasoline_prices_are_not_stimulating_economy/
• George.
Click on "In reply to", for Authors past commentaries.
Another Record High in Crude Oil Inventories
* January 27, 2016
After last night’s big build in inventories reported by the API, traders were expecting a larger than expected increase in stockpiles from this morning’s report from the Department of Energy, and that’s exactly what they got. With the consensus estimate calling for an inventory build of 4 million barrels, the actual increase was more than twice that at 8.383 million. That puts current US crude oil inventories at a record high of 494.92 million barrels. As shown in the chart below, another week like this and we are going to have to adjust our y-axis higher. In the lower chart, we show the spread between current inventory levels of crude oil relative to their average for this time of year going back to 1983. At current levels, US inventory levels are now 50% above normal!
https://www.bespokepremium.com/think-big-blog/another-record-high-in-crude-oil-inventories/
• George.
Charts From Oil's Spike Low
By Greg Schnell
* January 25, 2016
With the bearish tone of the market showing its true colors, the webinar was focused on looking for bottoms in the current decline. We will be watching closely over the next week to see if the market can gain enough strength to take out the late highs of December. In the meantime, rallies are to be traded, not held. The link to the webinar with these charts is The Commodities Countdown Webinar 20160121.
The first chart is the Bullish Percent Index from Energy. A reading of 2.5% has coincided with significant lows. While this just means a tradeable low, it marks the potential to be one of the final reference lows in the decline of oil company stocks. I don't see this low as the final low for oil, but the potential for some Oil and Gas production stocks to start outperforming the price of oil is probably arriving.
Looking specifically at crude oil, the chart of $WTIC crude made some positive signals technically while wiping out the previous lows. First of all, the acceleration of the decline into the final low is a good signal for a meaningful low to be established. This plunge below the trend line suggests a change in trend where the sellers are being exhausted. While this does not write the low as the final low, it goes a long way towards setting up a level where crude could retest and have trouble going below. On the MACD, which we use as an indicator of momentum, the indicator usually shows a positive divergence on a final low. This is something that usually happens, it does not have to be there. It is not in place on this low on the daily or the weekly as shown in the second chart below.
Looking on a weekly chart, positive divergence is not in place compared to the most recent low. If a retest occurred with a much higher momentum low, that would be a significant change in momentum that is more likely to be indicative of the final low. As this momentum gets less negative, we can watch for stocks starting to go up even while crude oil stays at depressed levels. The integrated oil companies (they also have refining margins which improve during low prices - so they have 'integrated operations' rather than just exploration) have held up better. We want to see pure oil and gas exploration companies emerge that might show who the leaders will be coming out of the final lows. There is a lot more about this on the webinar. Commodity Countdown 20160121 I will also be discussing this specifically for both Canadian and US Exploration and production stocks in the webinars this week.
The overall markets continue to trade in sympathy with the price of oil. The actual Wednesday low in oil coincided with the final contract for February delivery. Upon the expiration of the February contract and the roll to the March contract, we saw a rally in oil start. Now comes the monitoring of the situation to see if crude can continue to stay well above the $27.50 level. The trading is always very volatile near the extreme lows on a chart. Based on the weekly volume bars on the chart above, we have had three weeks of extreme volume. While last week's price candle closed higher than the previous week, it also contained the price of $27.56. So a lower low but a higher close. The extreme volumes show serious downside stress and perhaps the final flush of trading.
Arthur Hill did a great job on his webinar last Tuesday if you had a chance to see it. Arts Charts Webinar (20160119). One of Arthurs themes was setting resistance levels rather than support levels as the overall direction of the market is down. I had not viewed the market from that perspective, so I found it very interesting. If you get the chance, invest an hour there.
I will be hosting 2 webinars this week. The Canadian Technician Webinar on Tuesday 20160126 and the Commodities Countdown Webinar 20160128. Follow the links to register. Both webinars will include a lot of information about oil and gold right now. There are reasons to pay attention to both in the current market environment. We also have the Fed meeting this week which should send Wednesday into a wide, swinging affair. With lots of verbal intervention into the current market downtrend from central banks worldwide, the price action will be particularly important heading into the weekend as a large piece of the S&P500 earnings are released this week.
Good trading,
Greg Schnell, CMT
http://stockcharts.com/articles/commodities/2016/01/charts-from-oils-spike-low-webinar-20160121.html
• George.
Click on "In reply to", for Authors past commentaries.
Peek Into Crude Oil Future Through Futures
* January 23, 2016
The following are futures positions of non-commercials as of January 19, 2016. Change is week-over-week.
Crude oil: For the first time during the current bear market, a producing nation has expressed a desire to slash production, with the condition that OPEC should move first. A non-OPEC nation, Oman on Monday said it was willing to cut production by five to 10 percent.
On the other side of the spectrum, blaming unseasonably warm weather and rising supply, the IEA expects the crude oil market to remain oversupplied until at least late 2016.
The EIA report for the week of January 15th had more negatives than positives.
Crude imports fell by 409,000 barrels a day, to 7.78 million barrels per day.
Distillate stocks declined by a million barrel, to 164.5 million barrels. The prior week was the highest since the January 21, 2011 week.
However, crude stocks increased by four million barrels, to 486.5 million barrels. Five weeks ago, stocks were 490.7 million barrels, which was a stone’s throw away from the all-time high 490.9 million barrels in the April 24th week.
Production rose by 8,000 barrels per day, to 9.24 mbpd – a 21-week high. Production peaked at 9.61 mbpd in the June 5th week.
Refinery utilization fell by six-tenths of a percent, to 90.6 percent – a nine-week low. Utilization peaked at 96.1 percent in the August 7th week.
Gasoline stocks increased by 4.6 million barrels, to 245 million barrels. This was the 10th straight weekly increase, and at the highest since the March 16, 1990 week (no typo).
By Wednesday, spot West Texas Intermediate had dropped to $27.56 intra-day (not seen in the chart below as it uses weekly close). The EIA report should have added fuel to the fire. But it did not. Thursday, oil rallied, Friday it rallied even more.
The nearest resistance lies at $34-$34.50.
It will be interesting to see non-commercials reaction to this week’s action. Right on cue, they added to net longs this week. Last week, holdings were at the lowest since July 2012.
Currently net long 193.5k, up 17.5k.
http://www.hedgopia.com/cot-peek-into-future-through-futures-27/
• George.
Click on "In reply to", for Authors past commentaries.
AI
