[MrBill]

$this->bbcode_second_pass_quote('Typhoon', 'A') major ridge will set up over the eastern U.S. in mid-November. Most ensembles show the NAO going extremely positive, along with a negative PDO. A few days ago, I was discussing the possibility that winter weather might not come for awhile. The situation looks even more clear now. There could potentially be RECORD warmth in the Northeast. Longs beware! I have been bullish for the short-term. Now, I'm not.

[Typhoon]

This morning, signs are starting to emerge about the pattern change. There's no way to tell if we're merely reverting to normal weather, or if December will be bitterly cold. However, change is coming. An important step is the PV being kicked eastward out of Alaska. It's been stubbornly in place there for a long time, but models are showing it starting to move. The latest run of the Euro model is one of the reasons for bringing up that change is coming. It's possible, however, that the Euro is jumping the gun. The GFS doesn't buy into the Euro scenario yet.

Even if the pattern change becomes a little clearer, I don't know when the market will pay attention to it. In the meantime (today through at least November 15th), the warmth will prevail. Thus, I am bearish for the short term in the absence of unforeseen major bullish news.

However, I am very bullish for the medium to long term. I'm somewhat convinced that we could have a slightly colder-than-normal winter. The long-term outlook for oil production is obviously far more important. If peak oil occurred this year or if it will occur in early 2006, it might take awhile for the data to show that it indeed occurred. Once that happens, there's no doubt that oil prices are going much higher.

$this->bbcode_second_pass_quote('MrBill', 'C')an you just define the NAO/PDO abbreviations? Thanks.

[MrBill]

Heading into the NYMEX open in 20 mins we are range bound slightly under $60 in the WTI with no support coming from the products which are all in negative here this morning. Mild weather is the predominant factor being cited. Given the daily technical picture is still bearish; we are in a downtrending channel; we tested the topside on Friday; then today in absense of any supporting/mitigating factors, we should continue downwards to the $57-58 area.

However, I would not be surprised to see NY try to flush out the weak shorts and cause a round of profit taking. The market is getting speculatively short the oil complex, so we can expect profit taking along the line. I myself am a bit too nervous for this market. I am not a true believer, so until I see confirmation, I am sitting near the sidelines. Good luck.

p.s. thanks for the comments on the weather. Very much appreciated.

[tdrive]

$this->bbcode_second_pass_quote('', 'I') myself am a bit too nervous for this market.

[dunewalker]

I asked this question on another thread but realize that this might be a more appropriate place to get an answer:

"Over the past few months I've been checking oil prices daily and have noticed a trend that maybe someone else can explain: on the NYMEX graph the price of crude oil plunges at 11am almost every trading day. Is this because some trading venue opens, or Warren Buffet's limo arrives at Wall Street, or what??"

Here's the link to the current graph: http://321energy.com/

[cube]

$this->bbcode_second_pass_quote('MrBill', '.')...
However, I would not be surprised to see NY try to flush out the weak shorts and cause a round of profit taking. The market is getting speculatively short the oil complex, so we can expect profit taking along the line.
...

[MrBill]

Thanks for those links. Very much appreciated!

In the composition of traders you have small traders, commerical traders and large speculative traders. You are right, for every buyer there is a seller at every price, so the number of traders long must equal the number of traders short.

However, consider their motivation? A commerical trader is primarily a hedger. An oil company may want to predominantly sell to hedge their long oil postion when the price is attractive. The power company that relies on natural gas to fuel their plant may be a natural buyer to lock-in supply at an affordable price. These commercial traders are large, but they do not offset one another perfectly. Oil companies want to refine year-round whereas power companies have peak loads and seasonal needs.

The large speculators basically do not care whether the price goes up or down. They just want to make money from the trend. They step-in to bridge the gap between hedgers. They are the biggest off-set between commercial buyers and seller.

In between are the small traders like myself. We are basically jobbers or day traders. Sure it is nice to catch a big move now and again, but mainly we try to take advantage of short-term movements, and often open and close our positions on the same day. Who knows, perhaps we're just closet pseudo-masocists? Gluttens for punishment? Early heart attack victims?

When I say take profit, I basically mean that the large speculative traders have been on a move for a while, say from $70.85 down to $60, and they decide that it is time to take profit on their shorts as they are starting to see commercial buyers come into the market for their natural buying needs? As they are the bulk of the open, unalligned volume, their behavior often either spells the end of a move signalling a reversal, or if they are all on the same side of the market, like during last summer's run-up in prices, then they are adding to the momentum of the trend, perhaps pushing it farther than would be the case if only commerical traders were running the market?

As to the timing of market moves during the day you have the afterhours ACCESS trading system which opens in Asian trading time; then the IPE in London opens up in the European timezone; then 30 minutes before the NYMEX opens up in NY, the ACCESS system closes; and then the NYMEX opens up. So at the start and end of each trading system you can see exaggerated moves as traders open up new positions or close them. Most recently, I have witnessed that the NYMEX is very volatile in its first hour of trading. I don't know if that coincides with your 11 a.m. observation? In any case, moves at the open and at the close of the open pit sessions tend to be the most volatile times to trade.


Yesterday we saw a nice move down to $58.80 in the DEC WTI. However, profit taking and short covering in the nat gas and heating oil on some cold weather concerns drew a line under the price erosion which started on Friday. I am thinking that as soon as traders start to think about winter weather related demand that they will begin to be less aggressive about being short the nat gas & heating oil and that this should lend support to the crude. I am not sure whether gasoline will continue to try to test $1.5000 from the $1.5500 area here, but if heating oil rallies the spread will become too tempting if heating oil moves in the direction of $1.8500 from $1.7900 here? A thirty cent premium between unleaded gasoline and heating oil may be a buy considering they traded at par during the summer. However, that spread has yet to find its bottom, so perhaps we will even see better levels?

Probably some range trading consolidation today ahead of tomorrow's inventory numbers. Also looking for the EIA Short-Term Energy Outlook for November to assess demand.

[MrBill]

Commentary compliments of Refco Overseas London

$this->bbcode_second_pass_quote('', 'N')ews:

· The IEA raised its oil and gas price projections for the next 25 years due to OPEC policies and more volatility due to weaker investment in upstream projects. Nominal oil prices could rise 140% by 2030 and the oil import price may climb to $86. The outlook for oil demand was revised down 6% to 115-mbpd.

· Louisiana says 50.1% of oil production or 101,789-bpd has been restored

· MMS update reports 773,097-bpd or 51.54% of US Gulf oil output still shut-in with cumulative lost production since 8/26 of 80.526 million barrels or 14.708% of annual Gulf output. There were also 201 platforms and 5 rigs evacuated, or 24.54% of 819 manned platforms and 3.73% of 134 rigs currently operating in the Gulf.

Refinery news:

· A fire hit an alkylation unit at PDVSA’s 300,000-bpd Cardon refinery Monday though fuel exports weren’t affected because the unit was undergoing repairs.

[cube]

$this->bbcode_second_pass_quote('MrBill', '.')...
Who knows, perhaps we're just closet pseudo-masocists? Gluttens for punishment? Early heart attack victims?

[fossil_fuel]

according to CNN business news, the dollar just hit a 2 year high against the euro.

anyone have any opinions on currency trading?

[MrBill]

$this->bbcode_second_pass_quote('fossil_fuel', 'a')ccording to CNN business news, the dollar just hit a 2 year high against the euro.

anyone have any opinions on currency trading?

[MrBill]

$this->bbcode_second_pass_quote('kochevnik', ':')!:

I'm curious, has anyone SUCCESSFULLY purchased a far-out Call Option on Crude Oil ... say 2009 or later ?

I noticed a while back that the prices on my broker only updated for these far out options once a day. So, I contacted the help desk and they told me there is no real liquid market for these options so little of the info in the quotes section was accurate and that if I wanted a quote I'd have to call the trading floor. So, today I called the floor and was told that they were not quoting anything beyond 2007 or so.


So I'm not really sure what to do at this point. I plan on placing bids well above the previous days settlement price to see if someone will bite. I did that today and didnt get any response. I would hate to think there is little or no way to buy these options.

Anyone have any suggestions ? Any idea if changing borkers might help ?

Thanks.

[MrBill]

News today compliments of Refco Overseas London

$this->bbcode_second_pass_quote('', 'N')ews:

· EIA raised its projection for world oil demand growth in Q4 to 85.4-mbpd from 85.3-mbpd but lowered the Q1 2006 estimate to 85.3-mbpd from 85.4-mbpd in last month’s report. US Q4 demand was revised up 80,000-bpd to 20.50-mbpd, Q1 ’06 revised up 10,000-bpd to 20.82-mbpd. World 2005 oil demand growth was revised down 100,000-bpd, as was 2006 projected growth. 2005 US oil demand growth was revised up 30,000-bpd and 2006 demand growth was revised up 10,000-bpd. EIA predicts WTI will average $57.27 in 2005 and $64.40 in 2006. US retail gasoline is seen averaging $2.29 in 2005, down from $2.34 in the October report. The 2006 average is seen at $2.43, down from $2.45 a month ago.

· EIA predicts recovery of Gulf Coast production from hurricane destruction will take three months longer than expected, until June 2006. Shut-in US Gulf oil output is seen at 353,000-bpd or 22% of pre-hurricane levels in March and shut-in Nat gas output is seen at 2.1-bcfd or 20.6% of pre-hurricane levels. Gulf Coast refinery capacity is seen totally restored by the end of February.

· Norway’s Oct crude oil output fell by 300,000-bpd on the year and 40,000-bpd on the month to 2.5-mbpd due to production stoppage and technical problems in several fields.

· Louisiana reports 51.1% of oil production or 103,804-bpd has been restored

· MMS update reports 738,617-bpd or 49.24% of US Gulf oil output still shut-in with cumulative lost production since 8/26 of 81.262 million barrels or 14.842% of annual Gulf output. There were also 195 platforms and 5 rigs evacuated, or 23.81% of 819 manned platforms and 3.73% of 134 rigs currently operating in the Gulf.

· Dow Jones survey finds OPEC Oct output fell 220,00-bpd to 30.06-mbpd

[SupaNova]

I agree with Bill.... the technical picture remains negative although there is a clear lack of downside follow-through at present

Colder forecasts are pending for both the US & Europe... nothing bitter just the late arrival of winter so we should see temps drop from their current above normal levels.

Todays stats are antipated to show builds across the board... could we be in for a surprise reaction though as I fancy this is priced in anyway.

Yesterday the EIA short-term energy outlook was updated - EIA stel - it reckons US-GOM production will not be back to pre hurricane levels until mid 2006

[MrBill]

Weekly DOE Petroleum Supply Forecast

Distillates f/c +1.0 mio to 122 mio vs. 123 mio 3-yr ave
Gasoline f/c unch'd to 197 mio vs. 196 mio 3-yr ave
Crude f/c +2.0 mio to 321 mio vs. 289 mio 3-yr ave
Refinery Runs f/c +2.5% to 85.0% vs. 92.6% last year

the market is soggy, but again so far today, no new lows. a creeping bottom? seasonal factors starting to assert themselves? like Mr. SuperNova says, expect a surprise on the upside/bullish report as the market is already discounting further builds and more bearish news to come? Gap on the daily chart up to $60.40 to close as resistance and the low at $58.60 as support in the DEC WTI, but am of the opinion that we need a decisive move in the heating oil or unleaded gasoline to bust out of these ranges.

[Typhoon]

I don't know about a technical continuation of the decline down to a Fibonacci level. I think we might have a bullish inventory report 20 minutes from now. I'm not ready to give another weather update due to the uncertainty of the colder weather ahead, although I'll tell you when it becomes clearer. However, the fact that colder weather to some extent is coming, along with a bullish report, should turn this market around.

[MrBill]

No, unfortunately Typhoon, crude inventory is about as uncommon as a flooded cellar in Lousianna and unleaded gasoline is so plentiful they'll be giving young 'uns baths in it pretty soon!

Distillates down 0.1 mio to 120.80 mio vs. 123 mio 3 yr. ave
Gasoline +4.2 mio to 201.1 mio vs. 196 mio 3 yr. ave
Crude +4.5 mio to 323.6 mio vs. 289 mio 3 yr. ave
refinery runs +1.5% to 84% vs. 92.6% last year

Total demand 20.46 mbpd -1.9% vs. -1.8% neutral
Distillate demand 4.12 mbpd +.04% vs. -1.5% bullish
Gasoline demand 9.06 mbpd -0.4% vs. -1.7% bullish

But only heating oil has really managed much of a rally since the nos. although crude and nat gas are playing catch up on this headline about oil execs agreeing to consider conservation programs???

[Typhoon]

MrBill, it would be great if you could tell me what you think is going on today. Gasoline spiked above $1.60, with crude touching $60.50. Then, there was a pullback. Now we're in positive territory, but only slightly so.

A normal progression to winter is definitely happening. However, I am finally confident enough to confirm that it could easily be worse than that. For those who aren't interested in meteorological discussions, here's a summary: it's impossible to do precise forecasts two weeks out, but the general idea seems correct. There could be sub-zero temperatures spilling into the U.S.

About two weeks from now, the arctic airmass that has built up will finally make its way into the U.S. It will perhaps come through the Great Lakes area into the Midwest and East Central U.S. Today's 12z GFS run looks very similar to yesterday's 12z run, indicating good model consistency. The 200mb wind chart indicates the right setup for this arctic air outbreak. And it's not just the OP GFS and Euro...the ensembles are all very similar. This indicates above-normal confidence in the forecast. Ensembles basically tweak conditions slightly from the main model run. Therefore, ensembles essentially show the margin for error.

Two things that would help the bitter cold scenario are if the slow transition to a La Nina finishes by December, and if the NAO swings negative. Both seem possible, but by no means certain.

[MrBill]

Well, as per my commentary earlier, the expected range was $58.60 to $60.40 which has been the exact range so far. Tested previous low after the bearish numbers and then rallied to close the gap at $60.40 when the heating oil surged on a slight draw. I don't think it was the draw so much as a technical bounce on profit taking, but I do see that demand has been stronger as well. Remember that diesel comes from the same end of the barrel as heating oil, so this is not just about winter, but also about transport.

The technicals has given us a correction after yesterday's inside range day. Now the question remains, is this a reversal? So far we are back down, but a true technican thinks once broken the follow through is inevitable? I am not too sure, but this should mark the end of the sell off from $70.85 and start a correction based on stronger fundamentals from the products lead by nat gas and heating oil? However, we have not even closed today, so it is hard to build a true picture without a close and tomorrow's price action for confirmation? We went into this report very bearish for the most part.

However, based on today's movements we should look for WTI ato $60.40 (achieved), heating oil to 184.25, unleaded to 1.6150, nat gas to $12.50 and gasoil to 55780? That would take us out of oversold territory without an actual reversal in trend. Reversal in trend would come with a break above $62.15 area with the products likely leading the charge?

Alaska Cold Front?

[tdrive]

$this->bbcode_second_pass_quote('', '
')I'm curious, has anyone SUCCESSFULLY purchased a far-out Call Option on Crude Oil ... say 2009 or later ?

Anyone have any suggestions ? Any idea if changing borkers might help ?