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COT - Commitments of Traders in Crude Oil Futures Market Report
By: Software North | November 18, 2022
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Commodity price changes over the last year...
By: Charlie Bilello | November 19, 2022
• Commodity price changes over the last year...
Heating Oil: +43%
Natural Gas: +29%
Corn: +17%
Soybeans: +13%
Brent Crude +8%
US CPI: +7.7%
Gasoline: +5%
WTI Crude: +2%
Sugar: -1%
Wheat: -1%
Zinc: -4%
Gold: -6%
Copper: -16%
Silver: -16%
Cotton: -26%
Coffee: -34%
Lumber: -44%
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$WTI crude oil confirmed that it is already declining into the next 15 week cycle low that is expected to occur on the week of January 9th
By: CyclesFan | November 19, 2022
• $WTI crude oil confirmed that it is already declining into the next 15 week cycle low that is expected to occur on the week of January 9th. The target is the August 2021 low at 62, maybe even lower.
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Oil hits 6-week low on China demand worries; crude in ‘contango’ mode
By: Investing.com | November 18, 2022
Crude prices entered into “contango” mode — a market structure that defines weakness — the first time since 2021 after carrying potential weekly losses of as much as 10% as China’s Covid headlines, new hawkish signals from the Federal Reserve, and easing supply worries all came to a head for oil bulls.
The front-month December contract for the U.S. crude benchmark West Texas Intermediate, or WTI, was at $79.42 a barrel by 11:15 ET (16:15 GMT), down $2.22, or 2.7%. Earlier, December WTI traded at a discount to the January 2023 contract.
While the so-called contango difference between the contracts was meager, it represented a structural oil market weakness where buyers wishing to hold a position in WTI at the time of contract expiry would pay more to switch to a new front-month contract.
WTI aside, the front-month January contract in Brent, the global oil benchmark, was at $87.31 a barrel, down $2.47, or 2.8%. Like WTI, January Brent was also at a contango to February Brent earlier.
On a weekly basis, WTI was down 10.8% at the time of writing, adding to last week’s near 4% deficit. Brent was off 9% for the current week, after last week’s slide of 2.6%.
In terms of contract lows, WTI’s session bottom of $77.23 and Brent’s intraday low of $85.81 both marked a trough since Sept. 28.
“Oil prices are continuing to retreat against the backdrop of increasingly gloomy economic prospects and surging Covid cases in China which risk further restrictions and lockdowns, threatening demand in the world's second-largest economy,” said Craig Erlam, analyst at online trading platform OANDA.
With Brent having broke below the psychological $90 mark and WTI at under $80, Erlam wondered much this would test the “patience of OPEC+” — the global oil producing alliance that decided from this month to cut 2 million barrels per day from the collective output of the 23 countries in its coalition.
Erlam noted that OPEC+ was severely criticized for the production cut by the Biden administration and the Paris-based International Energy Agency, which represents oil consuming countries — and yet the alliance’s efforts came to nothing in terms of price support.
OPEC+’s motive was to offset constant worries about oil demand that had crept up in recent months as global economies sent off recession signals from runaway inflation in the aftermath of the pandemic. Crude prices hit 14-year highs in March, with Brent just shy of $140 and WTI tipping just over $130. By September though, Brent had fallen to around $82 and WTI to around $76.
The OPEC+ ordered production cuts sent Brent up again almost $100 two weeks ago and WTI reached above $93.
But Covid headlines out of China zapped the rebound, driving both benchmarks forcefully lower over the past fortnight.
China is battling coronavirus outbreaks in numerous major cities, including Chongqing and the capital Beijing, while it takes steps to try to ease the burden of its strict zero-COVID policy, which has caused severe economic damage and widespread frustration nearly three years into the pandemic.
Several Chinese refiners have asked Saudi Aramco (TADAWUL:2222) to reduce December-loading crude oil volumes, two sources close to the matter told Reuters, as COVID-19 restrictions and a faltering economy have weakened fuel demand in the world's biggest oil importer. The refiners had reportedly sought to trim supplies for December by about half of the previous month's level.
St. Louis Federal Reserve President James Bullard — one of the U.S. central bank's biggest policy hawks — has added to the bearish pressure on oil by saying that inflation remains “unacceptably high” for the Fed to ditch jumbo-sized rate hikes in favor of only smaller increases.
Some of the geopolitical risk that sent oil higher earlier this year, specifically the Ukraine conflict, had also eased of late. For instance, Poland and NATO concluded on Wednesday that a missile that crashed inside Poland was probably a stray fired by Ukraine's air defenses and not a Russian strike, easing fears that the conflict between Russia and Ukraine was spilling across the border.
A flotilla of ships is carrying distillate fuel to New York Harbor to shore up stocks ahead of the winter, further easing supply worries, Reuters said in a report citing traders and shipping data. At least 11 vessels that can carry about 3.6 million barrels of distillate, which includes low-sulfur diesel and home heating oil, will arrive in New York Harbor in late November and early December, the report added. That would be equivalent to about 4% of all the U.S. East Coast's distillate fuel imports in 2021.
With all the negativity in the market, “could OPEC+ go even further [with production cuts] if the outlook continues to deteriorate when it meets again in a couple of weeks?” Erlam asked in the oil market commentary he issued Friday.
OPEC+ meets on Dec. 4 to review its production policy — just before the start of the Dec. 5 “price cap” on Russian oil, which is widely expected to be a market-boosting event for crude, given that the EU-G7 engineered initiative will theoretically lead to reprisals from Moscow.
Some analysts, however, think Saudi Arabia — which leads OPEC+ as the Arab world’s largest oil producer and as the only nation with the perceived ability to hike and cut crude exports at will — might not be able to go too far from November’s two million-barrels per day cut.
“Not so sure KSA has much of a hand to play,” Art Berman, an energy analyst widely-followed on Twitter, said, referring to the Kingdom of Saudi Arabia, which he added would probably be “more effective at flooding the market than starving it in the past”. The kingdom is also “super-aware of maintaining its role as an honest & reliable supplier unlike Russia”, Berman added.
In another tweet labeled “Aramco Theater”, Berman played down state-owned Saudi oil company Aramco’s caution that world oil capacity remained at ‘extremely low’ levels — the company's reminder to the oil trade that crude prices should be correspondingly higher.
“The world should be worried’: Saudi Aramco…has issued a dire warning over 'extremely low' capacity,” Berman wrote. “It has been “extremely low” for the last decade except for the 2 years of COVID.”
Talk is also growing that the G7-EU engineered Russian oil price cap, which market bulls expect to lead to an even bigger crunch in global supply, will only result in a fleeting price rally.
“That’s because Russian barrels will likely get rerouted and not taken off the market,” said John Kilduff, founding partner at New York energy hedge fund Again Capital. “That’s exactly the wish of the U.S. and its allies — that the Russians earn considerably less for the same volume of oil floating around the market.”
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$SNMP Evolve Transition Infrastructure LP, together with its subsidiaries, engages in the acquisition, development, ownership, and operation of infrastructure for the transition of energy supply to lower carbon sources in the United States. The company engages in gathering, processing, and transporting natural gas, NGLs, and crude oil. This segment also operates approximately 160 miles of gathering pipelines, as well as four gathering and processing facilities, including stabilizers, storage tanks, compressors and dehydration units, and other related assets in Western Catarina, which are located in Dimmit and Webb Counties, Texas; and provides upstream production services from the Eagle Ford Shale in South Texas. It owns production assets in Texas and Louisiana. Evolve Transition Infrastructure GP LLC serves as the general partner of the company. The company was formerly known as Sanchez Midstream Partners LP and changed its name to Evolve Transition Infrastructure LP in February 2021. Evolve Transition Infrastructure LP was incorporated in 2005 and is based in Houston, Texas.
Crude Oil Markets Plunge Into the Weekend
By: Christopher Lewis | November 18, 2022
• The crude oil markets plunge during the trading session on Friday, as we have seen a significant amount of downward pressure finally break the back of support.
WTI Crude Oil Technical Analysis
The West Texas Intermediate Crude Oil market has plunged during the trading session on Friday to break below the $80 level. At this point, it looks like we are ready to continue to see a lot of selling pressure as people are starting to truly worry about demand overall. At this point, the market is likely to continue to see a lot of noisy behavior, but the fact that we have pierced the crucial $80 level tells me that we are either coming close to a capitulate towards the bottom, or we are about to see something really ugly happen.
We have formed a massive “M pattern”, which is a very negative sign. If we break to a fresh, new level, look out below, because crude oil is going to plunge.
Brent Crude Oil Technical Analysis
Brent markets have fallen significantly during the trading session on Friday as we have plunged through the $90 level. By doing so, the market looks as if it is ready to go much lower, perhaps down to the $82.50 level, where we had bounced from previously. At this point, it appears that the markets are focusing almost solely on the idea of a lack of demand, which is almost certainly going to be the case if we continue to see the economy slowdown around the world.
With that being the case, I think this has become a “fade the rally” type of market until it proves itself otherwise. We have a lot of work to do to change the attitude of the market, so this point I think you are looking at more weakness than anything else.
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Natural Gas Markets Find Buyers on Adept
By: Christopher Lewis | November 18, 2022
• The natural gas markets have fallen initially during the trading session on Friday, but then turned around to show signs of life again as we are testing the top of the previous consolidation rectangle.
Natural Gas Technical Analysis
Natural gas markets have initially plunged during the trading session on Friday, but then turned around to find buyers, especially near the $6.00 level. This area is right in the middle of the consolidation area that we have been in for a while, and of course is a large, round, psychologically significant figure. As a general rule, large amounts of money come back and forth into the market in these big figures, so it should not be a huge surprise. That being said, I think you also have to look at this through the prism of whether or not it is bottoming at a much bigger consolidation range.
You could make an argument for the $5.00 level being the bottom of a huge range that runs up to the $10.00 level. We are closer to the bottom than the top, so we could rally, but I think at this point you need to look at this through the prism of a potential rally, but if we were to turn around and break down below the $5.00 level, we would almost certainly collapse.
The 50-Day EMA broke below the 200-Day EMA just above, so I think there is some significant resistance there. If we were to break above the $7.21 level, then it opens up a path to the highs of the range, closer to the $10.00 level above. Regardless, this is a market that you need to be cautious with your position size, because it will continue to be very volatile and prone to sudden spikes in both directions.
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Gales Of November. The Energy Report
By: Phil Flynn | November 18, 2022
The gales of November came early this year as the petroleum oil market sank with no regard to near-record-low supplies. Normally we get these crazy oil selloffs right around or on the Thanksgiving Holiday but this year the market looked like it feasted early on too much turkey and had a tryptophan-induced market crash. It’s probably a good thing that diesel supplies are at a 70-year low and global oil inventories are at the lowest level since 2004 because then oil might have gone to negative $50 again!
How much of this sell-off is real and how much of it is built on perception? What we know is real is that inventories are near historic lows. We know that US oil production may falter because of a lack of investment and a drop in the number of drilled but uncompleted wells. The market can fear demand destruction in the future and while demand numbers continue to disappoint by some measures, the reality is that the supply side of the market suggests that if demand does come back, we won’t be able to meet it with supply.
Yet recession fears are real. With the Federal Reserve totally fixated on whipping inflation, even if it drives the economy into a recession or worse, it is causing petroleum liquidation, not so much on where we’re at right now but on where we may be in the very near future. The oil market did not like it when San Francisco Federal Reserve President Mary Daly told the world that the Fed pausing interest rate hikes if off the table. She said that she believed that interest rates should be 4.75 to 5.25% to be appropriate. Look to old people like me that remember that 5.25% interest rates are still relatively cheap in the whole scheme of things yet the oil market took that as a sign that the Fed wants to generate a deep recession.
It is not a secret. Most oil analysts know that the only way we have a chance to meet demand this winter is if winter is mild or if we have a severe economic slowdown. You can absolutely be right about the prediction that supplies are going to get to dangerously low levels but it won’t matter if the demand for oil just stops.
Reports say that freight rates have plunged by as much as 90 percent in the last year from the unprecedented highs they enjoyed during the pandemic and are expected to stabilize in the short term. New ships are coming online as well keeping rates low but also raising concerns about global demand for products.
We also saw a big drop in the Philly Fed hitting the lowest level since May of 2002 stirring up recession fears. RT reported that the Philly Fed said its diffusion index for current activity tumbled to a negative 19.4 in November from a negative 8.7 in October, with a negative reading indicating a contraction in regional manufacturing activity. The decrease in the Philly Fed index came as a surprise to economists, who had expected the index to inch up to a negative 6.2.
Yet the reality is that even though the charts look terrible and there’s probably going to be more weakness in the short term, the reality is that the market is probably overplaying its hand to the downside. At some point, we think we are going to see a major turnaround and have a chance to make new price highs this winter.
In the short term, the market can forget the fact that there is no spare oil production capacity in the world. It can forget that when the Chinese economy starts to reopen the market is going to be tighter than perhaps it’s ever been in the history of the global energy markets.
The oil market can ignore the fact that the geopolitical risk to supply is high with Iranian drone attacks on Israeli tankers as well as an oil embargo that’s set to go into effect next month on the Russian oil supply.
The market can ignore the fact that a price caps scheme that Europe has in mind will probably cause a shortage of oil supply. But only for so long. So, what I am saying is that when this correction is over it should be a screaming buy. This should be a time to buy bullish options. Yet be careful about buying too early because in oil its said, they never give up their dead when the gales of November come early.
Natural gas got a lift on November gales coming early. Winter along with a bullish EIA storage report had them forget about the drama surrounding the restart plans or lack thereof at the Freeport LNG terminal. EIA reported that, “Working gas in storage was 3,644 Bcf as of Friday, November 11, 2022, according to EIA estimates. This represents a net increase of 64 Bcf from the previous week. Stocks were 4 Bcf higher than last year at this time and 7 Bcf below the five-year average of 3,651 Bcf. At 3,644 Bcf, the total working gas is within the five-year historical range.
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Bull of the Day: Phillips 66 (PSX)
By: Zacks Investment Research | November 18, 2022
Phillips 66 (PSX) is an oil and gas firm that topped our quarterly estimates in early November and boosted its guidance once again for 2022, and more importantly, for fiscal 2023.
Phillips 66 shares have soared in 2022, yet its improved earnings outlook has kept its valuation levels very appealing. Plus, its strong dividend yield is much-needed as investors attempt to find ways to keep pace with inflation. And it said earlier this month that it will return an additional $10 billion to $12 billion to shareholders between mid-year 2022 and the end of 2024.
Phillips 66 Basics
Phillips 66’s diversified energy portfolio includes midstream operations, which generally features the transport and storage of crude oil before it is refined and processed. The company also runs a refining segment that turns crude into everything from fuels for transpiration to lubricants and specialty products such as petroleum coke, solvents, and other products.
On top of its chemicals, refining, and specialties segment, Phillips 66 runs a successful marketing segment. The company operates Phillips 66 branded gas stations and service stations around the U.S. and beyond. Phillips 66 is also making sure it’s prepared for the expansion and likely transition to alternative fuels and energy in the coming decades and beyond.
Phillips 66’s emerging energy efforts include renewable fuels, batteries, carbon capture, and hydrogen. For instance, the company said recently that it’s converting its San Francisco refinery in Rodeo, California into “one of the world’s largest renewable fuels facilities,” with the project set to begin commercial operations in Q1 of 2024.
Image Source: Zacks Investment Research
Recent Growth and Outlook
Phillips 66 and others benefitted immensely from rising oil and energy prices amid the huge rebound in demand as the U.S. and economies around the globe soared back to life after the covid crash. Travel, including air, has already mounted a serious comeback and broader energy demand is returning to pre-covid levels. Plus, the ongoing Russian invasion of Ukraine continues to negatively impact oil and gas supplies.
Even though oil prices have come back down from their peaks of over $100 a barrel, they have hovered between roughly $80 and $90 a barrel for the last few months. Phillips 66’s revenue skyrocketed 74% last year, with its adjusted earnings up from a loss of -$0.89 per share to +$5.70 a share.
Phillips 66 has topped our quarterly estimates by an average of 28% in the trailing four quarters, including a 30% third quarter beat on November 1. Management was able to raise their guidance once again for FY22 and fiscal 2023, which is no easy task amid the current environment that’s seen the wider S&P 500 earnings picture fade.
PSX’s four quarter and first quarter FY23 consensus estimates are now up 41% and 49%, respectively over the past 60 days. Phillips 66’s FY22 and FY23 EPS estimates have climbed by 28% and 30%, respectively during this same stretch. Zacks estimates call for its 2022 revenue to soar 47% to $169.32 billion to help boost its adjusted earnings by roughly 270% from under $6 a share all the way to $21.00 per share.
Phillips 66 is currently projected to see its revenue and earnings decline on a YoY basis in 2023 as they come up against nearly impossible to compete against periods. But there is no guarantee that those estimates don’t continue to improve as they have over the last several months.
Other Fundamentals
The so-called lost decade for oil and gas companies forced everyone in the industry to reevaluate every aspect of their business, slimming down operations to run more efficiently than ever. The cost-cutting measures are now paying off in a huge way amid rebounding oil and energy prices. The trimmed down operations will also help Phillips 66 and others keep margins relatively high going forward.
Phillips 66 generated $3.1 billion in cash from operations in the third quarter. This helped the company return $1.2 billion to shareholders through dividends and share repurchases last quarter. Better yet, PSX announced during its investor day on November 9 that it plans to return an additional $10 billion to $12 billion to shareholders between mid-year 2022 and the end of 2024 via buybacks and dividends.
Additionally, Phillips 66 said it will start to roll out sustainable cost reductions of $1 billion through business transformations. With this in mind, Phillips 66’s 3.6% dividend yield blows away its industry’s 2% average, as well as oil and energy titan Exxon Mobil’s (XOM) 3.2%. The company also has a very sustainable 22% dividend payout ratio.
Image Source: Zacks Investment Research
Price and Valuation
PSX shares have climbed 77% in the past two years to lag behind its highly-ranked industry’s 95% but blow away the S&P 500’s 10% gain. More recently, Phillips 66 shares are up 10% in the last six months to hit new 52-week highs on November 14. And its current Zacks consensus price target offers 12% upside to the roughly $108 a share it trades at right now.
On the valuation front, PSX trades at 7.2X forward 12-month earnings. This represents a 30% discount to its own 12-month median. Looking back further, the nearby chart showcases that Phillips 66 trades at a 35% discount to its own decade-long median and roughly in line with the Zacks Oil and Energy sector. And PSX trades not too far above its lows of 5.9X during this stretch.
Bottom Line
Phillips 66’s Oil and Gas - Refining and Marketing industry ranks in the top 7% of over 250 Zacks industries. PSX also sports “A” grades for Value, Growth and Momentum in our Style Scores system. Its commitment to boosting its dividend should help investors as they try to fight back against ongoing inflation. And investors looking for value during the current market and economic conditions would do well to consider Phillips 66 or other oil stocks.
Phillips 66’s positive upward earnings revisions help it grab a Zacks Rank #1 (Strong Buy) right now. Plus, the broader oil and gas sector will likely remain a major backbone of economies around the world for decades to come. And let’s remember that Phillips 66 is already preparing for an alternative fuel and energy future.
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Today's Futures Heat Map
By: Barchart | November 17, 2022
• Today's Futures Heat Map
Strongest: Natural Gas, Feeder Cattle, U.S. Dollar Index, Live Cattle
Weakest: Crude Oil, Palladium, Heating Oil, Cocoa
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70 Year Low. The Energy Report
By: Phil Flynn | November 17, 2022
Petroleum traders must be wildly pessimistic about the state of the global economy because not even what you might call stunningly bullish supply-side data can muster an oil price rally.
As reported by the Financial Times, “US stocks of diesel and heating oil have plunged to historic lows, driving up prices for fuels critical to industry, freight, farming, and many households. Inventories of the fuel category that includes both products stood at 107.4mn barrels last week, according to government data released on Wednesday, up slightly from the week before but the lowest level for this time of year since 1951.”
The Wall Street Journal reported, “While the price of gasoline is up about 14% this year, diesel has climbed about 50%, to $5.35 a gallon, according to AAA/Opis. The gains widened the gap between the two to an all-time high of $1.61. A year ago, it was 23 cents. Wholesale diesel, delivered into New York harbor, traded at a record premium to crude oil in October, according to the Energy Information Administration, which also reported the country had only 25 days of diesel in reserve, the lowest since 2008.
And it is just not products. Not only are global supplies at the lowest levels since 2004 but US inventories are plunging, a fact that has been hidden somewhat because of Strategic Petroleum Reserve releases. Javier Blass at Bloomberg points out, “Over the last 12 months, US commercial crude stocks have increased by 2.4 million barrels while strategic stocks have declined by 214.0 million barrels.
The EIA yesterday reported that U.S. commercial crude oil inventories decreased by 5.4 million barrels from the previous week. At 435.4 million barrels, U.S. crude oil inventories are about 4% below the five-year average for this time of year. Yet Strategic Petroleum reserve supplies are at the lowest level in 38 years.
The only way that this market is not rallying from such bullish data is the expectation that we are headed into a deeper recession. There is some evidence that we are seeing a potential slowdown in the economy right now. The cost of container ships is going down. We are hearing from places like Target that sales are on their way down. The consumers are struggling.
At the same time, we have the Federal Reserve that is telling us right now that they still want to be very aggressive in raising interest rates even though we’ve seen mixed signals from some Fed speakers. The hawkishness has given some support to the dollar that had been selling off.
Reuters reported that Fed Governor Christopher Waller, an early and outspoken “hawk,” said the Fed has a way to go on rates and will still need increases into next year although he added that data made him “more comfortable” with the idea of slowing to a 50-basis point hike in December. San Francisco Fed President Mary Daly told CNBC it’s reasonable for the Fed to raise its policy rate to a 4.75%-5.25% range by early next year, and that pausing rate hike is not part of the discussion.
Yet at the same time Reuters is reporting that, “Oil prices settled more than a dollar lower on Wednesday after Russian oil shipments via the Druzhba pipeline to Hungary restarted and as rising covid-19 cases in China weighed on sentiment. The market later recovered some losses after U.S. crude stocks fell more than expected on the back of heavy refining activity. The Energy Information Administration said U.S. crude inventories (USOILC=ECI) fell by 5.4 million barrels last week, compared with expectations for a 440,000-barrel drop. In addition, tanker-tracker Petro-Logistics said in a report that exports from the Organization of Petroleum Exporting Countries (OPEC) have fallen significantly so far this month. Meanwhile, Iraq plans to raise its production capacity to around 7 million barrels a day in 2027, state-owned oil marketer SOMO told Reuters, although any increases will be in coordination with OPEC.
To cut through the noise, the reality is if supplies are dangerously tight, in the short term the market can view the market negatively because the thinking that recessionary demand decreases will keep supplies ample. Yet this is a dangerous game. That may be one reason why we’re seeing a lot of activity in out-of-the-money call buying and why the momentum right now seems to be very negative. We’re only a short trip to weigh from a massive oil and product price spike. Hedgers should take advantage of this market weakness and perhaps join the speculators in buying some calls. Maybe the economy will slow enough to where we stop seeing global inventories plummet, but then again maybe not.
Old man winter still has the final say in the natural gas market. Natural gas prices looked very weak with a lot of speculation that the Freeport LNG terminal would not restart caused the market to plummet. Yet forecasts shifted towards colder temperatures and that turned the market around. We think when Freeport LNG files its restart plan we could see a mighty big pop if the weather forecast holds up.
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Crude Oil Continues to Drift Lower
By: Christopher Lewis | November 17, 2022
• Crude oil markets have struggled a bit on Thursday again as we continue to see worries about demand causing major issues in this market.
WTI Crude Oil Technical Analysis
The West Texas Intermediate Crude Oil market has fallen a bit during the trading session on Thursday as we continue to see a lot of noisy behavior. At this point, the market is likely to continue to see a lot of noisy behavior, but a lot of concerns about demand more than anything else. Because of this, I think it’s probably only a matter of time before you see the market break down even further. However, there is a significant support region just below, so a bounce is not totally out of the question. Above, the 50-Day EMA offers a significant amount of short-term resistance, and then you have longer-term resistance closer to the $92.50 level.
Brent Crude Oil Technical Analysis
Brent has also drifted lower and has a much more obvious support level at the $90 level. If we can break down below the $90 level, then it’s possible that we could go down to the $82.50 level. A short-term bounce is most certainly possible, but I think at this point you need to keep in mind that this is a situation where the market will continue to see a lot of concerns about demand.
Ultimately, demand falling is probably the worst thing that you can see in the markets, so it does tend to trump everything else. With this, I think it is likely going to continue to see rallies get faded, but if we did break out above the $100 level, then you would have to stand up and take notice. However, at this point in time it’s likely to continue being a bit difficult to get there, let alone above there.
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Natural Gas Markets Continue Sideways Momentum
By: Christopher Lewis | November 17, 2022
• Natural gas markets have done very little during the trading session on Thursday, as we continue to see a lot of noisy behavior.
Natural Gas Technical Analysis
Natural gas markets have initially tried to rally during the trading session on Thursday but gave back gains rather quickly. At this point, the market looks as if it is slowly trying to grind to the upside, but there is a lot of resistance above that will cause major problems.
Because of this, it’s very likely that we will continue to see noisy behavior, and therefore I’m not looking at this through the prism of a big move. It even mind that the Freeport LNG terminal is still unable to provide gas for Europe, so I think you’ve got a scenario where there is a certain amount of demand due to the fact that temperatures in the United States are starting to fall.
That being said, I see a significant amount of resistance near the $6.65 level, as the 200-Day EMA sits there, and the 50-Day it has broken below it in that same area. Breaking above that then brings into focus the idea of testing the “island reversal” that happened about 2 weeks ago. Breaking above the $7.21 level could open up a bigger move to the upside.
However, you can see that the market continues to see a lot of volatility, and the fact that we could not continue to go higher shows that any move to the upside is going to be fought with a lot of resistance. On the downside, if we can take out the hammer from the Wednesday session, that opens up the possibility of a move down to the $5.50 level, and then possibly even the $5.00 level. With this, expect volatility and keep your position size reasonable.
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Oil $WTIC - Failure to recover that along with the Stepped-Red & Teal/MA's would favour the Target into the Low $70's & $60's...
By: Sahara | November 16, 2022
• $Oil $WTIC - Still under the Daily Ivory/MA Kosh.
Failure to recover that along with the Stepped-Red & Teal/MA's would favour the Target into the Low $70's & $60's...
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XLE Opening sweeper in to the 12/16/22 $92 PUTS ~ $1.5 mil premium
By: Money Flow Mel | November 16, 2022
• $XLE Opening sweeper in to the 12/16/22 $92 PUTS ~ $1.5 mil premium.
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U.S. oil inventories fell by 5.4 million barrels last week: EIA
By: Investing.com | November 16, 2022
U.S. crude oil inventories fell by more than expected last week, the Energy Information Administration (EIA) said.
Crude inventories dropped by 5.4 million barrels, against expectations for a draw of 0.44M barrels.
Distillate stockpiles rose by 1.12M barrels last week, compared with expectations for a draw of 0.513M barrels.
Gasoline inventories rose by 2.207M barrels, against expectations for a build of 0.31M barrels.
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Crude Oil Markets Continue to Consolidate
By: Christopher Lewis | November 16, 2022
• Crude oil markets have consolidated over the last several weeks, and the Wednesday session of course has been no different than any other at this point.
WTI Crude Oil Technical Analysis
The West Texas Intermediate Crude Oil market pulled back just a bit during the trading session on Wednesday, as we continue to see the 50-Day EMA offer resistance, and we are sitting just above the psychologically important $85 level. At that point, I do think that breaking below there could open up a move down to the $81 level. On the other hand, if we do turn around to the upside we have to deal with the 50-Day EMA, the 200-Day EMA, and then eventually the $92.50 level.
Brent Crude Oil Technical Analysis
Brent markets also have struggled a bit, but quite frankly this has been a very quiet session. I think a lot of people are trying to figure out whether or not the market is going to focus on a lack of supply, or a lack of demand. There are a few things out there that causes more of a wrecking ball effect on quicker than a lack of demand, because quite frankly if nobody wants to buy it, the price really doesn’t matter.
If we turn around to break down below the $90 level, then the market could very well drop from there somewhat significantly. At that point, we would probably see quite a bit of negativity throughout the energy sector, as we head into a global recession. On the upside, the $100 level is an obvious area of resistance and we have formed a bit of a “double top” at that point. With this, it’s likely that we continue to see this market stuck in this range, or perhaps drop more likely than anything else.
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Natural Gas Markets Break Minor Trendline
By: Christopher Lewis | November 16, 2022
• The natural gas markets have fallen hard to kick off the trading session on Wednesday to break through a minor trendline. At this point, it looks like the sellers are back.
Natural Gas Technical Analysis
Natural gas markets have fallen rather hard during the Wednesday trading session, piercing the $6.00 level. At this point, the market could drop down to the lows again near $5.25, where we had seen this small uptrend line start. At this point, I think it’s probably going to continue to struggle as the Freeport LNG terminal will not be able to supply Europe with gas anytime soon. In other words, the demand part of the equation has been taken out due to the lack of supply.
The 50-Day EMA has just broken through the 200-Day EMA forming the so-called “death cross”, which is a longer-term bearish signal. Granted, it’s extraordinarily late most of the time, but a lot of algorithms will look at that through the prism of negativity.
At this point, it certainly looks as if we are continuing to look at this as a potential barrier. If we turn around a break above the 200-Day EMA, it’s possible that we could go looking to the $7 level. If we can break above there, then the $7.20 level becomes important as it was the high of the reversal that we formed.
I think the only thing you can count on is a lot of noisy behavior in this market, but that’s nothing new when it comes to natural gas. Natural gas continues to be noisy as it always is, so make sure you position size accordingly, and get a lot of notes from people who lose a lot of money in this market as it can rip your face off based upon a random weather report.
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The Energy Report
By: Phil Flynn | November 16, 2022
World leaders boldly came up with a plan to not take any responsibility for the economic hardships the world is going to face. When in doubt, just blame it on Ukraine. The Wall Street Journal reported that, “Leaders of the Group of 20 countries unanimously endorsed a declaration saying the war in Ukraine is hurting the global economy, a message that showed Russia’s increasing isolation on the world stage as the costs of the conflict mount.” So, in other words, do not try to blame Europe for idiotic green energy policies or massive, out-of-control money printing for inflation, just blame it on Ukraine. Not only does that give cover to world leaders, it’s so very convenient.
Biden, of course, has blamed Ukraine for most of his problems when it comes to inflation and gasoline prices. It was never about his anti-fossil fuel agenda; it was either greedy oil companies or OPEC but now just blame it on Ukraine. Besides, it gives Biden some cover and he can say then all the leaders of the group of 20 countries agreed that it wasn’t his fault, it was the war in Ukraine. The Ukraine war is driving energy prices and hurting the economy. That is sort of like when he got more than 50 former senior intelligence officials to sign a letter outlining their belief that the disclosure of emails belonging to Joe Biden’s son Hunter “has all the classic earmarks of a Russian information operation”.
Yet the risk of Russia’s war in Ukraine became real to oil traders yesterday when it was reported that a missile fired allegedly from Russia hit Poland and killed two people. That snapped the oil market out of its malaise and it was a reminder that when you look at the global supplies of oil and distillate fuels, there really is no room for error. Yet immediately Russia claimed they never targeted Poland and now the evidence seems to back what Russia was saying.
The Wall Street Journal reports that, “The missile that crashed in Poland on Tuesday, killing two people, was from a Ukrainian air-defense system, according to two senior Western officials briefed on preliminary U.S. assessments, but Poland is continuing its own investigation of the explosion. The initial findings were being discussed Wednesday at an emergency meeting at the North Atlantic Treaty Organization, where ambassadors from the alliance’s 30 members and candidates Sweden and Finland reviewed the intelligence and considered their options.”
We also saw a drone attack overnight on an oil tanker. The Wall Street Journal reported that, “an Israeli-owned oil tanker was hit by a suspected Iranian drone Tuesday night in the Gulf of Oman. According to the reports it created a hole in the ship but caused no injury or deaths. The Journal said that the 600-foot Pacific Zircon was traveling through the Gulf of Oman but no oil was spilled. The larger issue is tension between Iran and Israel is extremely high. Iran is facing a lot of political pressure at home. This could be a sign that Iran is trying to start a provocation with Israel to take the attention off of the hardliner’s crackdown on the Iranian public.
Despite all this risk to supply and inventory low, it’s surprising that the price of oil isn’t stronger than it is. The oil market has been reluctant to rally even though we saw an extremely bullish weekly American Petroleum Institute Report and growing risk to supply. The API reported a 5.835-million-barrel drawdown in crude oil supply. That is huge because the SPR releases of 5.4 million barrels means the draw would have been close to 10 million barrels last week. Distillate fuel increased by 850,000 barrels, which is not enough to give us comfort as winter approaches. The gasoline supply increased by 169,000 barrels.
Perhaps the reason why oil prices aren’t acting better could be that we’re going to hit a brick wall when it comes to the economy but let me see, the stock market rallying and the dollar falling, the weakness in oil might be tied into today’s options expiration. The market may feel it’s well supplied today but if you look at the back end of the curve we’re seeing that start to strengthen which means the market is suggesting that we may have dodged a bullet today but we face significant problems going forward.
The natural gas world is awaiting news when the Freeport LNG export terminal will reopen. The company Freeport LNG Development, L.P. (Freeport LNG) published yesterday the results of an independent, third-party root cause failure analysis (RCFA) report on the June 8, 2022 incident that occurred at its liquefaction facility. Yet the market at this point is more interested in when it reopens. EBW Analytics said that, “Rampant Freeport LNG rumors have precipitated tremendous intraday volatility for NYMEX futures over the past week. Freeport notified customers not to anticipate cargoes in November or December—offsetting bullish weather shifts. At the same time, the market is abruptly transitioning from the largest fall seasonal storage build in history to a sharp near-term cold. In our view, the renewed focus on rebuilding storage deficits increases exposure to the near-term upside. Still, NYMEX futures are being priced off the chances for a low probability, high magnitude price shock later this winter. It will ultimately require pervasive cold to justify lofty winter contract risk premiums—or natural gas prices may plunge.
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Oil inventories drop by more than expected 5.8M barrels last week: API
By: Yasin Ebrahim | November 15, 2022
Investing.com -- U.S. crude stockpiles fell much more than expected last week, though product inventories including gasoline increased, the API reported Tuesday.
West Texas Intermediate, the U.S. benchmark, traded at $86.80 a barrel following the report after settling up 1.2% at $86.92 a barrel.
U.S. crude inventories fell by 5.8 million barrels for the week ended Nov. 11. That compared with a build of 5.6M barrels reported by the API for the previous week.
Economists were expecting a draw of just 400,000 barrels.
API data also showed that gasoline inventories rose by about 1.7M barrels last week, and distillate stocks increased by 850,000 barrels.
The official government inventory report due Wednesday is expected to show weekly U.S. crude supplies fell by about 440,000 barrels last week.
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Today's Futures Heat Map
By: Barchart | November 15, 2022
• Today's Futures Heat Map
Strongest: Cotton, Heating Oil, Sugar, Equity Indices
Weakest: Coffee, Silver, Platinum, Wheat
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Oil Stock Baker Hughes (BKR) Headed Higher This Quarter
By: Schaeffer's Investment Research | November 15, 2022
• BKR is enjoying support from the ascending 10-day trendline
• BKR trades at a forward price-earnings ratio of 18.62
Baker Hughes Company (NASDAQ: BKR) is an energy technology company that provides solutions to the energy and industrial industries in over 120 countries. The company provides the oil and gas industry with products and services for oil drilling, formation evaluation, completion, production, and reservoir consulting. At last glance, BKR is trading 2.5% higher at $30.90.
On Oct. 27, Baker Hughes declared an increased quarterly cash dividend of $0.19 per share, compared to $0.18 per share in the previous quarter. The raise reflected dividend growth of 5.5%, placing its dividend yield at 2.45% and its forward dividend at $0.76. The dividend will be paid on Nov. 18, to shareholders on record by Nov. 7.
Furthermore, Baker Hughes also announced the authorization of an additional $2 billion to be added to its existing share repurchase plan, increasing the amount from $2 billion to $4 billion. The company has already repurchased approximately $1.2 billion shares under the current plan as of Sept. 30 and plans to fund the new amount through the sale of its BHH LLC common units.
On the charts, the equity struggled to gain traction until it bounced from a bottom just below $21 at the end of the third quarter. Since, the shares have seen several bull gaps, most notably one above the 50-day moving average in mid-October, with recent support stemming from the ascending 10-day trendline.
Moreover, BKR trades at a forward price-earnings ratio of 18.62 and a price-sales ratio of 1.44, signaling a relatively fair valuation when considering the business’s expectations for the coming year.
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Weekly Gasoline Price Update
By: Jill Mislinski | November 15, 2022
As of November 14, the price of Regular and Premium were down 4 cents each from the previous week. According to GasBuddy.com, California has the highest average price for Regular at $5.36 and Texas has the cheapest at $3.03. The WTIC end-of-day spot price closed at 85.87 and is down 6.4% from last week.
The next chart is a monthly chart overlay of West Texas Light Crude, Brent Crude, and unleaded gasoline end-of-day spot prices.
In this monthly chart, the WTIC end-of-day spot price closed at 85.87, down 6.4% from last week.
The volatility in crude oil and gasoline prices has been clearly reflected in recent years in both the Consumer Price Index (CPI) and Personal Consumption Expenditures (PCE). For additional perspective on how energy prices are factored into the CPI, see What Inflation Means to You: Inside the Consumer Price Index.
The chart below offers a comparison of the broader aggregate category of energy inflation since 2000, based on categories within the Consumer Price Index (commentary here).
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Natural Gas Markets Tighten
By: Christopher Lewis | November 15, 2022
• Natural gas markets have dropped a bit during the trading session on Tuesday, as they are hanging around the uptrend line.
Natural Gas Technical Analysis
Natural gas markets have dropped just a bit during the trading session on Tuesday as we continue to hug a trendline that I have marked on the chart. At this point, the market is likely to continue to see a lot of noisy behavior, as the 200-Day EMA sits just above, and is offering a bit of resistance. The 50-Day EMA is now starting to dip toward the 200-Day EMA, and if we do break down below there, it kicks off the so-called “death cross” that a lot of people pay close attention to.
That being said, if we do break above those moving averages, it opens up the possibility of a move to the $7.00 level. After that, it’s possible that we could go to the $7.50 level, and as a result I think you’ve got a situation where you are more likely than not going to see rallies faded at the first signs of exhaustion. Ultimately, I do think that we got a scenario where it’s likely we break down below the uptrend line, to go down to the $6.00 level. Breaking down below the $6.00 level, then it’s possible that we could go down to the $5.50 level.
Keep in mind that natural gas is dealing with the idea of the Freeport LNG terminal staying close longer than initially thought. This means that there won’t be massive exports to the European Union, which was part of what got everybody excited. At this point, I suspect that we have more downward pressure than anything else, so I fully anticipate that the market continues to drift lower. That being said, this is a very erratic market under the best of circumstances.
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Crude Oil Markets Continue to Stay in Consolidation
By: Christopher Lewis | November 15, 2022
• The crude oil markets have been relatively choppy during the trading session on Tuesday as we stay within a relatively well-defined range.
WTI Crude Oil Technical Analysis
The West Texas Intermediate Crude Oil market has dipped during the trading session to click off the trading session, but then turned around to show signs of life again. By doing so, it looks as if we are going to stay in the overall consolidation range we have been in for a while. Because of this, I suspect it is only a matter of time before we bounce again, but it’s probably worth noting that we are sitting on a support range, not a support line. I think this support could go all the way down to the $80 level. To the upside, I anticipate that the $93 level continues to be a difficult barrier to break above.
Brent Crude Oil Technical Analysis
Brent markets also have pulled back just a bit during the trading session, looking at the $90 level underneath as a significant support level. To the upside, we have the 200-Day EMA and the 50-Day EMA going sideways. It tells you that consolidation is likely, and in that scenario, we could see this market bounce around in the rectangle that I have drawn, with the $100 level above being an obvious resistance barrier.
Regardless, I think we’ve got a situation where the market is going to continue to be very noisy, but if we could break above the $100 level, then there is a big fight at the $103 level, which could cause a bit of trouble. Nonetheless, one of the biggest things that people are paying attention to is the fact that we are heading into a global recession, so despite the fact that supply is an issue, price is not reflecting that.
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Considerable Uncertainties. The Energy Report
By: Phil Flynn | November 15, 2022
The oil market seems out of whack, with other risk assets as well, with the bullish underlying fundamentals. One reason given for the oil price dramatic fall yesterday is the fact that OPEC in their “Monthly Oil Market Report“ (MOMR) warned that the oil market “faces considerable uncertainties.” And while that is a bold statement, the reality is that based on their own data, the oil market is tighter than it has been in over a decade.
OPEC revised lower its 2022 and 2023 oil demand growth forecasts by 100,000 barrels per day (bpd) to average 99.6 million bpd this year. Yet they see global oil demand growth at 2.5 million bpd in 2022 down 400,000 barrels per day. While that may sound a bit bearish, it also means that it is unlikely that OPEC will raise output and in fact may be laying the groundwork for another oil production cut. It also makes you wonder whether the globe has enough spare capacity to meet that demand.
Even the International Energy Agency in its monthly report is warning about tight global oil supplies. The IEA said that, “Global observed inventories fell by 14.2 mb in September as OECD and non-OECD stocks plunged by 45.5 mb and 19.3 mb, respectively, but were partially offset by a surge in oil on the water of 50.6 mb. OECD industry oil stocks declined by 8 million barrels, while government stocks drew by 37.4 mb. OECD total oil stocks fell below 4 000 mb for the first time since 2004. The question we must ask ourselves is if demand is so bad, why are global oil inventories so low? The IEA actually raised its demand forecast higher anticipating now 2.1 million barrel a day increase up from 1.9 million barrel a day last month.
We keep hearing that demand is low because of the COVID lockdowns in China and the slowing economy, but when you look at the hard numbers you would assume that that would mean that oil supplies would be rising not falling. Supplies are still falling even as the Biden administration has released a record amount of oil from our Strategic Petroleum Reserve (SPR). Last week the SPR release was 4.1 million barrels from the reserve. That means that of the 180 million barrels promised by the Biden administration that have released a total of 157.9 million barrels, leaving another 22.1 million barrels to be let out. For the entire year, they have released a total of 201.6 million barrels leaving the SPR supply at just 392.1 million barrels.
Based on this data, it is almost stunning to see oil prices act so weak. Yet we seem to be playing a bit of a technical range game and the market found some air pockets below. We are still getting tough talk from the Fed yet the dollar is weakening today after a bit of strength yesterday. The dollar is looking still toppy as we have fallen below some key support levels.
The International Energy Agency (IEA) is still bullish on diesel prices and warning that only high prices might cure high prices. The IEA says that, “High diesel prices are fueling inflation, adding pressure on the global economy and world oil demand, which is now expected to contract by 240 kb/d in 4Q22. Demand is forecast to expand by 2.1 mb/d in 2022 before slowing to 1.6 mb/d next year. The IEA said that, “Diesel markets were already in deficit before Russia’s invasion of Ukraine due to the closure of 3.5 mb/d refinery distillation capacity.
The competition for non-Russian diesel barrels will be fierce, with EU countries having to bid cargoes from the US, Middle East, and India away from their traditional buyers. Increased refinery capacity will eventually help ease diesel tensions. However, until then, if prices go too high, further demand destruction may be inevitable for the market imbalances to clear.
Tonight, we get the American Petroleum Institute (API) which should show another drawdown in crude oil supplies despite the SPR. Product should also remain tight and that should give the market some support.
Natural gas is playing Freeport LNG bingo! One of the major downward forces in US natural gas prices has been the problems with the Freeport LNG export terminal. In recent days, natural gas prices have flip flopped amid conflicting reports surrounding the restart of the beleaguered Freeport LNG terminal. Last week there were fake tweets by people purporting to be Freeport LNG. Those were denied by the company but the lack of new information coming from Freeport LNG is keeping the market guessing. The company confirmed that reports of a cracked pipe on Twitter were false.
Reuters Scott P. DiSavino has been checking with Freeport LNG. Reuters said that, “U.S. natural gas futures edged up about 1% on Monday, paring earlier gains of over 8%, on expectations that Freeport LNG will delay the restart of its liquefied natural gas (LNG) export plant in Texas from November to December. In addition to price swings due to Freeport, traders said futures soared earlier in the session due to forecasts for colder weather and higher heating demand than previously expected through the end of November.
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Energy stocks are in a bubble — and here’s when they’re likely to crash
By: Mark Hulbert | November 15, 2022
• Research shows that when a sector's trailing two-year return soundly beats the U.S. market average, that sector takes a beating over the next two years
Oil and gas stocks specifically, and the U.S. energy sector in general, are likely in a market bubble that’s vulnerable to popping.
That’s the conclusion when applying a formula from recent academic research into the predictability of stock-market bubbles and subsequent crashes. The research, which appeared in the Journal of Financial Economics, was conducted by Robin Greenwood and Andrei Shleifer of Harvard University, and Yang You of the University of Hong Kong. They found that the probability of a market sector crashing — defined as a drop of at least 40% over the subsequent two years — was correlated with its trailing two-year performance relative to the overall market.
The chart above provides the specifics, based on U.S. data back to 1926. Whenever an industry or sector outperformed the broad market by at least 100 basis, or percentage, points (1%) over a two-year period, there was a 53% chance it would drop by at least 40% over the subsequent two years. When the trailing two-year outperformance was at least 150 basis points (1.5%), those odds grew to 80%.
These findings are why the energy sector is so vulnerable right now. The Energy Select Sector SPDR, for example, has beaten the S&P 500 over the past two years by 153 percentage points. Assuming the future is like the past, the odds of the energy sector falling by 40% or more in the next two years are 80%.
On several prior occasions I’ve applied this academic research to various assets, and it’s worked every time. Here’s a brief rundown:
• November 2017: bitcoin BTCUSD, 3.27%. At one point in the two years after that column appeared, this cryptocurrency was down 61%.
• June 2019: bitcoin. At one point in the two years after that column appeared, bitcoin was 60% lower.
• February 2020:Tesla TSLA, -2.56%. At one point in the two years after that column appeared, this stock was 59% lower than where it was trading then.
• February 2021: S&P 500 Technology Hardware Storage & Peripherals Index. At one point over the 21 months subsequent to when that column appeared, this index was down 40%.
• February 2021: bitcoin. At one point in the 21 months subsequent to that column appearing, bitcoin was down 66%.
Do strong fundamentals apply?
Energy sector bulls might object that the energy sector is in a far different place than the assets that were the subject of those prior columns. The sector’s current valuation appears quite attractive, with P/E ratios well-below the overall U.S. stock market.
Yet I’m not sure stronger fundamentals can protect the energy sector from a much-heightened crash risk. For their Journal of Financial Economics study, the researchers could find no evidence that the probability of a crash was dependent on fundamental factors.
Greenwood said in an interview that he and several colleagues are continuing their search for such factors. In the meantime, he doubts there are any which significantly reduce the energy sector’s current vulnerability to a big price drop.
Don’t short energy stocks
It’s important to stress that vulnerability to a crash doesn’t automatically make energy stocks attractive short-sale candidates. Even though prices of these stocks are likely at some point in the next two years to be significantly lower, there’s no assurance that their declines will begin from current prices. On the contrary, the researchers found that sectors which satisfy their bubble criteria typically rise by an additional 30%, on average before succumbing to the law of gravity.
So even if you’re right in predicting the existence of a bubble, you can still find yourself under water — perhaps deeply — before eventually turning a profit. The safer action, should you agree that energy stocks are vulnerable to being much lower at some point in the next couple of years, would be to reduce exposure to the sector.
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COT - Commitments of Traders in Crude Oil Futures Market Report
By: Software North | November 11, 2022
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Commodity Prices Score Biggest Weekly Gain Since 1960 – What’ Next
By: Phil Carr | November 14, 2022
• Commodity prices across the board have made an explosive start to the month – registering their biggest back-to-back weekly gains on record since 1960.
Potential Big Moves Ahead, as Traders Focus On U.S PPI Data and the UK Autumn Statement
So far this quarter, a total 27 Commodities ranging from the metals, energies to agriculture have tallied up astronomical double-digit single day gains – not once, not twice, but on multiple occasions – outperforming every other asset class out there.
Just take last week for example – every possible commodity imaginable from Aluminium, Copper, Palladium, Platinum, Gold, Silver, Lumber, Zinc, Crude Oil to Natural Gas prices surged following Thursday’s U.S Consumer Price Inflation data – with a long-list chalking up spectacular gains of 10% or higher – literally in a single day!
The exact same thing happened in the previous week, following the U.S employment report. And yes, you guessed it – the week before that too following the Bank of Japan’s currency intervention.
As a result, there’s really nothing historical you can point to for what’s going on in markets today. We are routinely seeing Commodities across the sector whip up spectacular back to back gains of 10% or higher, almost on a weekly basis – fuelling an era of enormous wealth creation like we have never seen before.
Last week’s cooler-than-expected Consumer Price Inflation data offered some relief to the Fed, potentially indicating that October could be the start of a disinflationary trend that lasts through next year.
The headline Consumer Price Index rose less than expected – boosting expectations that supersize rate hikes are likely now in the rear view mirror. This week’s hotly anticipated U.S Producer Price Inflation reading will either boost or dampen expectations of a possible Fed “pivot” away from an aggressive interest rate hikes.
Elsewhere, this week all eyes will be on the UK Autumn Statement. After the disastrous “mini-budget” in September, which subsequently forced The Bank of England to revert back to unprecedented “Quantitative Easing” measures – this week’s Autumn Statement is already gearing up to be a major market-moving event, that traders will not want to miss.
Despite short-term UK borrowing costs stabilising since the market meltdown seen in late September, the Chancellor will need to present plans to address the 55 billion pound “black hole” in Government finances.
Should the Chancellor’s fiscal plan fail to instil confidence, then we could be on for a repeat of September announcement, which sent a long-list of commodities surging to multi-month highs – registering their biggest one-day move this year.
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Today's Futures Heat Map
By: Barchart | November 14, 2022
• Today's Futures Heat Map
Strongest: Natural Gas, Silver, Hard Red Wheat, Sugar
Weakest: Lumber, Cotton, Crude Oil, Orange Juice
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Billions. The Energy Report
By: Phil Flynn | November 14, 2022
Gasoline prices are clocking in at $377.3. Diesel prices are clocking in at a whopping $5.359 cents a gallon. Heating oil dealers are rationing supply in the Northeast and more than 20 million American households, or 1 in 6 American households, are behind on their energy bills. So, in light of all of this what is Biden doing? He is spending billions of dollars of taxpayer money to send to other countries to fight climate change.
Biden is also promoting new methane monitoring rules that will impact thousands of storage tanks and US production wells and potentially put most small oil and gas producers out of business. The impact of these new regulations could reduce our oil production by as much as 2 million barrels a day. That will further increase the cost burden for Americans and their energy bills. But do not feel bad because billions of your dollars will go to the UN Green Climate Fund.
The Wall Street Journal said that “the US owes about $2 billion to the UN green climate fund. The administration has asked for another $1.6 billion for the fund in its 2023 budget. The Wall Street Journal also says that Mr. Biden wants to pledge $150 million to the US fund for climate adaptation and resilience across Africa. They want to spend $13.6 million to the world meteorological organization to collect additional weather water and climate observations across Africa. They want to spend $15 million more dollars to support the development of early morning systems in Africa by the National Oceanic and atmospheric administration in conjunction with local weather forecasts. Now that sounds very generous but the UN says that we’re not spending enough money.
One of the ways that we could raise money for taxes is by looking at U.S. oil and gas production. The US oil and gas industry is one of the most taxed industries on the planet from top to bottom and is one of the main revenue sources for the federal, state, and local governments. Yet the signal from the Biden administration continues to discourage investment in U.S. oil and gas and continues to try to kill pipelines and create uncertainty in this investment environment. It’s all going to lead to higher prices and tighter supplies for all Americans. So when this cold front comes through and your bills go through the roof when you fill your gas tank, at least you know deep down inside you’re paying a lot of money to get a better weather forecast in Africa. That’ll make it all worthwhile.
Oil prices started off strong overnight, opening steady and rallying and now breaking a bit with reports that Ukraine is open to peace talks. The Wall Street Journal reported that, “Senior U.S. officials have begun nudging Kyiv to start thinking about peace talks in the event winter stalls its momentum, following Ukraine’s recapture of Kherson in one of its most stunning triumphs of the war. The imminent onset of winter-coupled with fears of inflation spurred by mounting energy and food prices, the billions of dollars of weaponry already pumped into Ukraine, and the tens of thousands of casualties on both sides-has prompted talk in Washington of a potential inflection point in the war, now in its ninth month.” This morning Ukraine’s President Volodymyr Zelenskyy said, “WE ARE MOVING FORWARD AND WE ARE READY FOR PEACE, PEACE FOR ALL OUR COUNTRY.”
Oil products and natural gas popped overnight as winter is going to descend on big parts of America. Natural gas had a big pop as did heating oil. We are pulling back a bit from the drop in the oil but it seems to be technical in nature. The market awaits more news on the potential for a price cap on Russian oil. But don’t be fooled. Price gaps mean shortages and eventually, the price cap will be bullish for oil.
Bloomberg Reports that, “The European Union is “ready to go” with an effort to impose a price cap on Russian oil, Ursula von der Leyen, the president of its executive arm, said Monday. “We have set all the tools necessary in place in the European Union,” von der Leyen told Bloomberg Television in an interview in Bali on the sidelines of the Group of 20 summit. “It is important not only to dry out the war chest of Russia but also very important for many vulnerable countries to have an acceptable level of prices.” She added that the price level hasn’t been decided yet according to Bloomberg. The biggest concern, of course, is that if Russia cuts off oil supplies when the price cap goes into place, Treasury Secretary Janet Yellen said that the US would then tap the strategic petroleum reserve. Wait a second didn’t, we do that already?
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Crude Oil Markets Continue to Grind
By: Christopher Lewis | November 14, 2022
• Crude oil markets have pulled back just a bit to kick off the trading week, as we continue to go sideways more than anything else.
WTI Crude Oil Technical Analysis
The West Texas Intermediate Crude Oil market as pulled back just a bit during the trading session on Monday as we continue to hang around and see very little in the way of clarity at this point. After all, keep in mind that we have a lot of different things moving the oil market right now, not the least of which would be the fact that the 200-Day EMA sits just above. If we can break above there, then we could threaten the $92.50 level, and open up the possibility of a move to the $100 level. On the other hand, if we do pull back, I believe that the $82.50 level is your support.
Brent Crude Oil Technical Analysis
Brent initially tried to rally a bit during the trading session on Monday, showing signs of hesitation, breaking below the 200-Day EMA. The market has been trading in a $10 range, with the $100 level above offering significant resistance, while the $90 level underneath continues offer support. As we continue to see a lot of noisy behavior, trying to figure out whether or not there is going to be enough demand out there to drive up prices, and of course whether or not there’s going to be enough supply. OPEC previously had cut supply by 2 million barrels a day, but if there’s no demand, that may not matter as much.
At this point, I look at this as a market that we are simply going to trade in a range, with clear support and resistance. I plan on taking advantage of that on a range bound type of system with reasonably sized trades.
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Natural Gas Markets Quiet to Kick Off Week
By: Christopher Lewis | November 14, 2022
• The natural gas markets have gone back and forth during the trading session on Monday, as we continue to try to look for directionality.
Natural Gas Technical Analysis
Natural gas markets have gone back and forth during the trading session on Monday, as we are trying to figure out where to go next. The $6.00 level should continue to be important, from a psychological standpoint if for no other reason. Ultimately, the $5.00 level in underneath there is even more important, so keep that in the back of your mind. Because of this, it’s very likely that the market is going to continue to see volatility, as we decide whether or not the market is going to fall apart, or if we are going to take out to the upside.
Looking at the chart, you can see that the 50-Day EMA is sitting just above, and it’s very likely that we are going to see it break down below the 200-Day EMA kicking off the “death cross” that a lot of people are paying close attention to. That being said, although it is very bearish, it does tend to lag the market in general, so do not be surprised at all to see the market ignore it.
On the other hand, if the market were to break above those moving averages, then it’s possible that we could see a bit of a shot towards the $7.00 level, and then of course breaking above that area could open up even more buying pressure, perhaps reaching the top of the huge consolidation area that is marked on the chart. I don’t necessarily call for this, but I recognize it very well could happen. Colder temperatures of the United States are elevating prices over the last couple of days, but at the same time the Freeport LNG terminal remains ineffective.
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OPEC cuts oil demand growth forecast again as economic challenges mount
By: Alex Lawler | November 14, 2022
LONDON (Reuters) -OPEC on Monday cut its forecast for 2022 global oil demand growth for a fifth time since April and also trimmed next year's figure, citing mounting economic challenges including high inflation and rising interest rates.
Oil demand in 2022 will increase by 2.55 million barrels per day (bpd), or 2.6%, the Organization of the Petroleum Exporting Countries (OPEC) said in a monthly report, down 100,000 bpd from the previous forecast.
"The world economy has entered a period of significant uncertainty and rising challenges in the fourth quarter of 2022," OPEC said in the report.
"Downside risks include high inflation, monetary tightening by major central banks, high sovereign debt levels in many regions, tightening labour markets and persisting supply chain constraints."
This report is the last before OPEC and its allies, together known as OPEC+, meet on Dec. 4 to set policy. The group, which recently cut production targets, will remain cautious, Saudi Arabia's energy minister was quoted as saying last week.
Next year, OPEC expects oil demand to rise by 2.24 million bpd, also 100,000 bpd lower than previously forecast.
Despite commenting on the rising challenges, OPEC left its 2022 and 2023 global economic growth forecasts steady and said while risks were skewed to the downside, there was also upside potential.
"This may come from a variety of sources. Predominantly, inflation could be positively impacted by any resolution of the geopolitical situation in Eastern Europe, allowing for less hawkish monetary policies," OPEC said.
Oil maintained a decline after the report was released, trading around $95 a barrel.
For October, with oil prices weakening on recession fears, the group made a 100,000 bpd cut to the OPEC+ production target, with an even bigger reduction starting in November.
The report said that OPEC output fell by 210,000 bpd in October to 29.49 million bpd, more than the pledged OPEC+ reduction.
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Oil extends gains on China reopening hopes, tightening supply
By: Ambar Warrick | November 13, 2022
Investing.com-- Oil prices rose on Monday as markets bet that an eventual scaling back of COVID-19 measures in China will boost the country’s crude demand, while looming curbs on Russian oil shipments also appeared set to tighten supply.
Crude prices closed last week lower, but rallied sharply on Friday after China said it will loosen some measures under its strict zero-COVID policy for the first time ever. The move drummed up expectations that the world’s largest crude importer is positioning for an eventual scaling back of COVID restrictions.
But the country is still struggling with a resurgence in infections, which saw renewed lockdown measures in several economic hubs. This tempered any major gains in oil prices on Monday.
Brent oil futures rose nearly 1% to $96.68 a barrel in early Asian trade, while West Texas Intermediate crude futures rose 0.6% to $88.15 a barrel. Both contracts lost about 2.6% and 4% last week, respectively.
Hawkish signals from the Federal Reserve also weighed slightly on oil prices, as Fed Governor Christopher Waller warned that while the bank is considering a slower pace of rate hikes in the coming months, it is not softening its stance against inflation.
Crude prices fell sharply from a peak above $130 this year, as rising interest rates and a series of COVID lockdowns in China raised concerns over demand.
But tightening supply, especially after the Organization of Petroleum Exporting Countries announced a 2 million barrels per day production cut, sparked a recovery in prices. The cut is expected to take effect from December, tightening supply and likely benefiting prices.
A European ban on Russian oil shipments is also expected to take effect from December, further tightening crude supply towards the end of the year.
But while tightening supply is expected to benefit prices in the coming months, downside risks to crude also persist. Worsening COVID infections in China could once again stymie the country’s economic activity, denting crude demand.
Rising interest rates and stickier-than-expected inflation also pose a potential risk to crude demand, especially if economic activity slows more than anticipated.
The U.S. government has also threatened to release more oil from its Strategic Petroleum Reserve to help bring down gasoline costs.
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Schlumberger Ltd. (SLB) Another leader in energy, chart looking very strong here
By: Options Mike | November 13, 2022
• $SLB Another leader in energy, chart looking very strong here
Lot of long term resistance here though.
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Occidental Petroleum Corp. (OXY) Big candle , filled the gap 76 next big level
By: Options Mike | November 13, 2022
• $OXY Big candle , filled the gap 76 next big level.
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Exxon Mobil Corp. (XOM) Add this on your watch list for Blue Skies this week
By: Options Mike | November 13, 2022
• $XOM Add this on your watch list for Blue Skies this week as well.
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Devon Energy Corp. (DVN) Gap at 75 key level to retake, 67 support
By: Options Mike | November 13, 2022
• $DVN Still in earnings doghouse. Gap at 75 key level to retake, 67 support.
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Chevron Corp. (CVX) Watch this one for blue skies this week
By: Options Mike | November 13, 2022
• $CVX Stop me if you heard this before.. New ATH's Friday.
Not extended or hot. Watch this one for blue skies this week.
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Energy Sector (XLE) Still holding in at ATH's no rotation out of this sector yet. Saudi committed to keeping Crude up....
By: Options Mike | November 13, 2022
• $XLE Still holding in at ATH's no rotation out of this sector yet. Saudi committed to keeping Crude up....
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The explosion of corporate impersonators on Twitter sank natural gas prices Friday after tweets circulated that purported to show that restarting a Texas gas-export terminal, shutdown since a June fire, would be further delayed
By: Cheddar Flow | November 12, 2022
• The explosion of corporate impersonators on Twitter sank natural gas prices Friday after tweets circulated that purported to show that restarting a Texas gas-export terminal, shutdown since a June fire, would be further delayed.
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$WTI crude oil failed closing above the 20 week MA and may have topped at 94.27
By: CyclesFan | November 12, 2022
• $WTI crude oil failed closing above the 20 week MA and may have topped at 94.27. A decline below 82.42 will confirm that it is already declining into the next 15 week cycle low on the week of January 9th.
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Commodity price changes over the last year...
By: Charlie Bilello | November 12, 2022
• Commodity price changes over the last year...
Heating Oil: +45%
Soybeans: +19%
Corn: +16%
Brent Crude +16%
Natural Gas: +14%
Gasoline: +10%
WTI Crude: +9%
US CPI: +7.7%
Wheat: +1%
Sugar: -2%
Gold: -5%
Zinc: -8%
Copper: -11%
Silver: -14%
Coffee: -19%
Cotton: -24%
Lumber: -32%
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The US Strategic Petroleum Reserve has moved down for 61 consecutive weeks to its lowest level since 1984
By: Charlie Bilello | November 12, 2022
• The US Strategic Petroleum Reserve has moved down for 61 consecutive weeks to its lowest level since 1984. The 33% decline in reserves this year is the largest on record by a wide margin.
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