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Op-Ed: US crude oil testing resistance

An oil pump jack in the oil town of Gonzales, Texas.
Getty Images
An oil pump jack in the oil town of Gonzales, Texas.

U.S. crude oil seems to be going nowhere but the weekly New York mercantile Exchange l chart for West Texas Intermediate tells a different story. The chart shows consistent bullish behaviour even though price has developed a temporary resistance level near $54. The sideways movement that has been in place since 2017 January has lulled some observers into a false sense of security when it comes to the potential for further increases in the oil price.

The weekly NYMEX Oil chart shows a long term inverted head and shoulder reversal pattern. This trend reversal pattern is reliable and has a high probability of reaching the projected price breakout targets.

This is a long-term trend reversal pattern that started in mid-2015 and which was confirmed towards the end of 2016. It is best seen on the weekly price chart.

The head and shoulders are shown with the curved lines. The sustained sideways move above $50 in the current uptrend confirms the inverted head and shoulder pattern and the continuation of the slow uptrend.

The depth of the head and shoulder pattern between the neckline and the head is measured and the value projected upwards. This gives a long term upside target near $68. This target is verified using the second chart feature that sets the character of the NYMEX oil chart.

The second feature is the historical pattern of support and resistance levels. The rebound from support near $48 is part of this pattern behavior. Resistance is near $58. A breakout above this level gives a medium term target near $68.

The historical resistance level near $58 is the most significant resistance level for any trend change. The level was broken in 2015 June but the breakout was overwhelmed by the wide separation in the long term Guppy Multiple Moving Average. This is not the situation today. Now the long term GMMA is acting as a support level and the move towards $58 is slow and steady.

The long term GMMA provides an indication of the way investors are thinking. The steady separation of the long term group of averages shows confident support for the new uptrend.

The short term group of averages provides an indication of the way traders are thinking. The consistent steady separation confirms strong confidence in the trend strength. Any pullback in price is taken as a buying opportunity. This is shown by the lack of compression in the short term GMMA when prices pull back.

The successful breakout above $48 is moving slowly to the historical resistance level near $58. This offers short term trading opportunities which can be exploited using the ANTSSYS method to trade the consolidation behavior. The breakout above $58 has a resistance target near $68 and this helps validate the head and shoulder price projection target.

Daryl Guppy is a trader and author of Trend Trading, The 36 Strategies of the Chinese for Financial Traders, which can be found at He is a regular guest on CNBC Asia Squawk Box. He is a speaker at trading conferences in China, Asia, Australia and Europe. He is a special consultant to AxiCorp.

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Crude oil – Too non-volatile to be true

Money managers boosted their bets on rising West Texas Intermediate prices to a record on speculation that OPEC and its partners would ease the global supply glut.

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Crude oil – Too non-volatile to be true

Money managers boosted their bets on rising West Texas Intermediate prices to a record on speculation that OPEC and its partners would ease the global supply glut.

Ravindra Rao

AVP- Commodity Research, AnandRathi | Capital Expertise: Commodities

Uncertainty continues as OPEC output and rising US rig-count would be the driving force for oil in 2017. Ever since the Organization of Petroleum Exporting Countries sealed an internal deal as well as one with a major non-OPEC, Russia, to cut production from 1st January to June 2017 to support falling prices, WTI prices have been steadily rising. In fact, from the date of the Vienna meet, 29th November 2016, oil has risen 23%. The bulls and bears are now fighting near $55 to get a grip on oil. The confusing thing is that, since January 2017, oil is trading within a tight range of $50 and $54. OPEC claims 86% of deal compliance has been achieved till 22nd February. There is no news of any OPEC member ditching the deal. On the other hand, the US rig-count is increasing due to rising WTI prices. This is something the market expected. Rising WTI prices render US shale-oil drilling financially viable, and every week the EIA’s report shows the rig-count rising (see chart below). The US rig-count (shown by the white line) has gone up since May 2016 to 602 on 24th February.

Because of the rising number of US oil rigs, total inventories on 17th February hit a record 518.6 million barrels according to the EIA. This puts considerable pressure on oil, though bears have been disappointed. The reason is OPEC’s commitment to bring price stability to the oil market. Last week, OPEC immediately came out in rescue of oil as the former showed readiness to extend the output-cut programme to H2 2017 and even to deepen cuts if necessary. So, once again bulls got active.
According to OPEC’s latest report, the club and its partners have reached 86% of their agreed cuts. Crude imports by OPEC’s Saudi Arabia decreased by 393,000 barrels a day last week to 1.06 million, according to preliminary EIA data for week ending 17th February. U.S. weekly imports of Saudi crude fell 27% to the lowest since December. OPEC production and the pace of U.S. drilling in 2017 would be the most significant drivers of crude oil balances and prices. The ambiguity surrounding the OPEC production accord has added volatility to oil prices. Besides, a more optimistic commentary from U.S. management teams implies more stable output, with a possible return to volume growth. Even Russian production heading into next year is high. Although global demand may have improved, the pace is unsteady.

Money managers boosted their bets on rising West Texas Intermediate prices to a record on speculation that OPEC and its partners would ease the global supply glut. Oil has been bound to the tightest price range in more than a decade, yet hedge funds have never been so confident it would eventually rally. The only thing is OPEC will have to keep production low once the accord expires in June. The market may tank once June arrives and OPEC decides not to extend the deal. However, before that, we expect the positive momentum to continue on track. Recently, the Iranian Oil Minister said that an oil rally above $60 a barrel would ultimately hurt OPEC because it would spur competitors to boost production and trigger a medium-term price drop. The US recently imposed new sanctions on Iran after the latter’s missile test recently. The US administration said that Iran’s continuing support for terrorism and development of its ballistic missile programme poses a threat to the world. The Iran government claims this is baseless and provocative. If such tension rises in coming sessions, we may see a spike in oil. Sentiment now supports oil prices. From the day OEPC started cutting output (1st January), prices have comfortably held above $50. As long as the psychological level of $50 is not breached, we are upbeat for March.

The author is Head – Commodity Research & Advisory at Anand Rathi Commodities

Millions at risk from Oil and Gas related earthquakes

Millions Now at Risk From Oil and Gas-Related Earthquakes, Scientists Say

By Zahra Hirji

Mar 3, 2017

Damage from an earthquake is seen at an Oklahoma home, where earthquakes have been linked to the injection of fracking wastewater underground. Millions of people in central and eastern U.S. are now at risk of damage from man-made earthquakes caused by oil and gas activities. Credit: Pat Carter/Getty Images

A new earthquake hazard map for the central and eastern United States shows about 3.5 million people, primarily in Oklahoma and southern Kansas, are at high risk of experiencing a damaging man-made earthquake from oil and gas-related activities this year.

Researchers at the United States Geological Survey have produced a one-year seismic outlook that takes into account both natural and human-caused earthquakes, mainly those generated by the underground disposal of oil and gas wastewater and, to a lesser extent, by fracking itself.

In recent years, there has been a surge in quakes linked to oil and gas activity, including a massive 5.8 event last September in Pawnee, Okla. Some have caused damage to homes, buildings and roads across Oklahoma and elsewhere, sparking public concern and prompting regulators to begin restricting local energy company activities.

Despite some pockets of the country remaining on high alert for damaging shaking, the scientists did find the region’s overall risk went down compared to last year, which was the first year of the seismic report. The 2016 forecast had indicated up to 7 million people had a chance of facing damage from a moderate man-made earthquake. The 2017 forecast was lower because the total number of earthquakes were lower in the study area in 2016 compared with 2015.

The scientists said the drop in earthquakes last year suggests man-made earthquakes can be controlled by reducing the fracking and/or wastewater disposal activity.

According to Mark Petersen, one of the leading USGS scientists involved in the project, the decrease was largely due to state regulatory actions starting in 2014 to restrict waste disposal and energy extraction in known potential earthquake zones. He also said it could have stemmed from companies reducing oil production and waste generation because of last year’s low oil prices.

“These reductions in earthquake rates indicate that this type of seismicity is manageable or controllable,” Petersen said a press conference announcing the 2017 forecast.

The researchers used the record of historical earthquakes (including all the ones in 2016), as well as studies and modeling in developing their 2017 hazard map. It showed that a large section of central and northern Oklahoma, as well as southern Kansas, faces a greater than 1 percent chance of experiencing a moderate earthquake this year. Moreover, a sliver of central Oklahoma faces an at least 10 percent chance. This especially high-risk area was the origin of the state’s largest-ever earthquake, the one that struck near Pawnee.

Overall the number of earthquakes in Oklahoma declined last year. However, the state was shaken by a record number of strong events in 2016. State regulators have increasingly put in place regulations to prevent man-made earthquakes, including rules announced in December on how drillers should respond to possible fracking-linked events.

According to a joint statement from state officials at the Oklahoma Corporation Commission and the Oklahoma Geological Survey, the USGS 2017 forecast “serves to confirm the validity of the work done in Oklahoma to reduce earthquake risk, as well as the need for the effort to continue.”

The new forecast also identified high risk in two other areas where oil and gas wastewater disposal takes place: a small area in northern Kansas, as well as an area called Raton Basin along the Colorado-New Mexico border, which experienced two earthquakes above magnitude 4.0 last year.

The researchers identified a new area of risk of man-made quakes, in western Texas, compared to last year. Meanwhile, the risk of damaging events in northern Texas largely disappeared compared to 2016. The USGS scientists said at the recent press conference that they did not know why this was the case and that Texas officials are studying the issue.

The threat of man-made earthquakes tied to oil and gas activities extends to states excluded from the forecast. For example, researchers have identified likely man-made earthquakes in multiple areas of oil and gas development in California. And state officials in Pennsylvania last month announced a series of four small earthquakes observed in April 2016 that they say was linked to a nearby fracking pad.

Nigeria: oil revenue dropped drastically

Reversing Nigeria’s Deferred $100bn Crude Oil Income

Ibe Kachikwu
Minister of State for Petroleum Resources, Dr. Ibe Kachikwu

Recently, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, reiterated that on account of militancy in the Niger Delta, Nigeria could not earn about $100 billion oil revenue in 10 years as he also opened up on plans to reverse the loss. Chineme Okafor reports

Though not entirely new, Kachikwu in a podcast he released recently stated that between $50 and $100 billion was not earned by Nigeria in 10 years because of frequent attacks on oil and gas infrastructure by the Niger Delta militants.

Kachikwu explained that at the peak of militancy within these periods, oil revenue dropped drastically, and production particularly ebbed from 2.2 million barrels per day (mbpd) to one million barrels per day in 2016

He said: “As at 2016 on the average and looking at it historically that Nigeria was losing $50 to $100 billion as a result of the disruption.”

He specifically added that the country’s oil and gas industry could not earn over $7 billion from January to October 2016, saying that over the last decade spanning through various administrations, the industry suffered critical disruptions to operations resulting in the unearned incomes.

According to Kachikwu, the unearned income also included that which international oil companies (IOCs), independent producers as well the Nigerian National Petroleum Corporation (NNPC) could not take from their operations in the fields.
“This is a problem that has consistently been there even before the government of President Obasanjo, and it went on into other governments. It is a problem that seems to be intractable. So, it is a difficult undertaking to try to embark on trying to resolve it once and for all, but we are very bullish about this,” Kachikwu said to buttress the longstanding existence of militancy and its impacts on Nigeria’s oil production.

Similarly, the Nigerian Petroleum Development Company (NPDC), a subsidiary of NNPC had from February 2015, consistently reported substantial deferred revenue averaging N25 billion per month from the a subsisting force majeure declared by Shell Petroleum Development Company (SPDC) following the destruction of 48-inch Forcados crude oil export line.

Plans to reverse the trend
While the NNPC has repeatedly said in its monthly operations report that comprehensive measures to limit the impacts of oil assets destructions on the financials of the corporation were being initiated but with some success from stopgap approaches, Kachikwu in the podcast disclosed some detailed plans he would adopt to end this.

According to the minister, a 20-point agenda which include periodic engagements with communities and stakeholders in town hall meetings, inter-agency collaboration, ring-fenced state approach to security of oil installations, as well as security hold-hands efforts to guarantee peace and investment on state basis would be adopted.

He also listed focused investments in gas-to-power, incentive for peace scheme, massive revamp of social infrastructure bases of the communities and establishment of a Niger Delta Development Fund Initiative, as the other approaches he hoped would end militancy in the Niger Delta.

Christened “Oil Sector Militancy Challenges…Roadmap to Closure,” Kachikwu explained that the new approach was aimed at instituting permanent peace in the oil-producing region.

According to him, the Niger Delta crisis, coupled with the 45 per cent drop in oil production, worsened the financial challenges of the President Muhammadu Buhari administration. He added that the new measures would address this financial challenge to the government.

Additionally, the minister emphasised that the crisis resulted in attacks on oil and gas facilities and the sub-optimal performance of the country’s refineries. He noted that Nigeria was unable to meet its international obligations as a result of the militancy.

Kachikwu explained that the new measure would build on existing efforts initiated by the government to end the crisis. According to him, a seven-point roadmap that included engaging the oil-producing communities and sustaining the Amnesty Programme for the repentant militants were in existence already.

Insisting that the administration was determined to tackle militancy and achieve peace in the region, Kachikwu noted that it would be bullish in its focus on remedying the environment of the Niger Delta, which he said was also rich enough for aqua tourism for revenue generation.

To clean up the environment, Kachikwu said Buhari would continue to implement the existing seven-point agenda and other behind-the-scenes engagements of relevant stakeholders.

According to him, the first point on the 20-point agenda he plans to launch would be for oil companies to engage the state governments and communities on issues affecting a particular state.

The second point, he noted, would focus on inter-agency collaborations between the Ministries of Petroleum Resources and the Niger Delta, as well as the NDDC on crosscutting development and operational issues of the region. The third point would be a ring-fenced approach to ending the militancy. On this, he stressed that the Federal Government would stop dealing with militancy as a national issue and adopt a state-by-state approach to ending it on the ground that each state in the region appeared to have peculiar challenges that prompt militancy in their areas.

Kachikwu said government would focus on creating 100,000 jobs in each of the oil-producing states in the Niger Delta in the next five years, while the Amnesty Programme would be decentralised because Federal Government can no longer fund the programme alone as a result of dwindling oil revenue.

Another plan under the agenda Kachikwu launched would be to adopt the “Security Hold Hands Approach”, which according to him, was aimed at strengthening security in the region through the collaboration of all the relevant agencies.

He also identified peace and investment initiatives as another focus in the new agenda, and stressed that peace encourages investment while crisis serves as a disincentive to investment. He noted that the agenda would encourage states in the region to continue to pursue peace in exchange for improved investment.

The minister equally added that there would be a core business focus wherein the Federal Government will continue to attract business opportunities to the Niger Delta, stressing that at the core of the militancy was the lack of economic opportunities for inhabitants of the region to earn decent lives for themselves and their families.
He said the setting up of cottage industries and business startups in the region will encourage violent agitators to shun militancy and engage in business activities that will earn them good incomes.

Kachikwu said that oil companies would be encouraged to embark on the revamp of oil and gas infrastructure in the Niger Delta, in addition to focusing on the “clean-up of our mess”. He noted in this respect, that the government had launched the Ogoni clean-up exercise which should restore the environment of Ogoni land.

Other aspects of the 20-point plan included the domestication of oil and gas business opportunities to achieve greater participation of the people of the oil-producing region without excluding other Nigerians.

He said the government would also encourage education programmes in the Niger Delta to make the people embrace education and shun militancy. He stated that the Amnesty Programme would be launched on a state-by-state basis to create opportunities for 5,000 to 10,000 youths in each states of the region.

Further on security and peace, Kachikwu explained that ensuring justice for all the stakeholders in the region would be the major plank of the agenda, while the government would continue to strengthen the military and other security agencies to maintain peace as it would no longer accept instances of militants holding the country to ransom.

A Global Glut is Ending

Crude oil rises after report shows drop in stockpiles

By Aaron Sheldrick | TOKYO

TOKYO Oil futures climbed nearly 1 percent on Thursday after data showed a surprise decline in U.S. crude stocks as imports fell, supporting the view that a global glut is ending.

The U.S. West Texas Intermediate crude April contract CLc1 had risen 50 cents, or 0.9 percent, to $54.09 a barrel by 0229 GMT.

Brent crude LCOc1 was up 51 cents, or 0.9 percent, at $56.35, although both benchmarks were still well within recent tight ranges.

Crude inventories fell by 884,000 barrels in the week to Feb. 17 to 512.7 million, compared with analyst expectations for an increase of 3.5 million barrels, data from industry group the American Petroleum Institute showed on Wednesday. [API/S]

That added to optimism earlier in the week when the Organization of the Petroleum Exporting Countries said a deal with other producers including Russia to curb output was showing a high level of compliance.

However, for prices to break out of their trading ranges, the market needs to see signs that OPEC inventories are falling, said Tony Nunan, oil risk manager at Mitsubishi Corp in Tokyo.

“It’s a battle between how quick OPEC can cut without shale catching up,” Nunan said, referring to U.S. drilling in shale formations that has shown an upsurge after prices rose this year. [RIG/U]

“What OPEC really has to do is get the inventories down,” he said.

Eleven non-OPEC oil producers that joined the OPEC deal have delivered at least 60 percent of promised curbs so far, OPEC sources said on Wednesday, higher than initially estimated.

In the United States, crude stocks at the Cushing, Oklahoma, delivery hub were down by 1.7 million barrels, while U.S. crude imports fell last week by 1.5 million barrels per day (bpd) to 7.398 million bpd, according to the API.

Official data from the U.S. Department of Energy’s Energy Information Administration (EIA) is scheduled to be released at 11 a.m. EST (1600 GMT) on Thursday, a day later than normal because of a holiday Monday. [EIA/S]

“All attention now shifts to the EIA crude inventory figures due out this evening in the U.S., with the market looking for an increase of 3.4 million barrels,” said Jeffrey Halley, senior market analyst at OANDA in Singapore.

“A big miss either way will set the short term direction for crude.”

(Editing by Richard Pullin and Joseph Radford)

How U.S. crude-oil inventories rose to their highest level ever

Crude supplies topped 518 million barrels last week: EIA

The oil is piling up.

MyraP. Saefong

Markets/commodities reporter

U.S. crude-oil inventories have climbed to their highest weekly level on record at the Energy Information Administration, and not just because of rising domestic production.

A number of factors, including strong oil imports, higher exploration and production company spending, and a slowdown in demand have combined to lift total commercial crude stockpiles to 518.1 million barrels for the week ended Feb. 10, according to EIA data dating back to August 1982.

That figure tops the former record of 512.095 million barrels for the week ended April 29, 2016.

All-time high for U.S. crude supplies

“The continued growth in the stocks of crude is due to higher production in U.S. shale plays and imports that exceed the volume needed by refiners,” said James Williams, energy economist at WTRG Economics.

“We have enough petroleum inventory to cover close to 70 days of consumption, when the historical norm is well below 60 [days],” he said. The Organization of the Petroleum Exporting Countries is “trying to reduce it, but the effect of [its] efforts are not showing up in the U.S.”

MarketWatch asked several analysts how stockpiles managed to reach an all-time high, even as domestic crude production currently stands at 8.977 million barrels a day—below the record peak output of 9.61 million last seen during the week ended June 5, 2015.

Here are the reasons they came up with (in unranked order):

• Strong imports: “The real driving force has been the surge in imports,” said Troy Vincent, oil analyst at ClipperData.

‘The real driving force has been the surge in imports.’

Troy Vincent, ClipperData

The EIA on Wednesday report that crude imports for last week averaged 8.5 million barrels, down 881,000 barrels a day from a week earlier. However, over the last four weeks, they have climbed 9.9% vs. the same period a year earlier.

Matt Smith, director of commodity research at ClipperData, said that the U.S. saw nearly 10% more waterborne imports in 2016 than the year before.

“Bargain-basement prices for foreign oil in the last year have been too difficult for U.S. refiners to ignore,” he said. “We will likely see this trend ebb in the months ahead, as OPEC imports fall off—yet U.S. production is rising again to plug the gap.”

• OPEC: “Keep in mind the OPEC cut isn’t really fully felt inside the USA just yet,” said Nico Pantelis, head of research at Secular Investor.

Read: Why OPEC’s oil production cut is a ‘gift to U.S. producers’

OPEC members agreed in late November to cut their production levels at the start of the new year by 1.2 million barrels in a bid to alleviate a glut of global supplies and prop up prices which had dropped by about half from their 2013 levels. Data, including some included in OPEC’s monthly oil report issued Monday, have shown a compliance rate of 90% with the reductions.

But the “transit time between the countries where the USA is importing a large part of its oil from is several weeks, so cargoes arriving from the Middle East are still geared towards a full production rate in Saudi Arabia,” said Pantelis, noting that 11% of U.S. imported oil comes from Saudi Arabia.

The market will see lower import numbers materializing in the next few weeks, he added.

• Reduced refinery runs: U.S. crude-oil refinery inputs averaged about 15.5 million barrels a day last week—that’s 435,000 barrels per day less than the previous week and down about 390,000 barrels from the year-ago level, according to the EIA.

Refinery utilization stood at 85.4% of capacity, down from 87.7% a week earlier and 88.3% a year earlier, data showed.

That means there’s less crude headed to, and being processed at, the refineries.

• U.S. production: Charles Perry, chief executive officer of energy-consulting firm Perry Management, summed this up well: “the rise in [crude] inventories is due to increase in domestic drilling driven by good economics for domestic production.”

Weekly U.S. crude-oil production at just under 9 million barrels a day has a ways to go before reaching any records, but domestic output has generally been climbing since the second half of 2016 as oil prices for West Texas Intermediate CLH7, -0.19% and Brent crude LCOJ7, -0.13% climbed to levels they hadn’t seen in more than a year.

The EIA has estimated that more than half of U.S. production comes from shale oil.

A monthly report from the government agency released Monday showed expectations for a month-on-month increase of 80,000 barrels a day in March shale oil production.

And oil-rig count data from Baker Hughes BHI, +0.00% point to even more output gains ahead.

Active U.S. rigs drilling for oil have climbed over each of the last four weeks to their highest level in roughly four months.

• Rise in oil company spending: “Several North American oil producers have increased their [capital expenditure] budgets in the final quarter of last year, and this resulted in a corresponding production increase, which is boosting the inventory levels,” said Pantelis.

Exxon Mobil Corp. XOM, +0.41% announced in late January that it plans to spend $22 billion this year, 14% higher than the amount it spent in 2016.

Read: Exxon surprises Wall Street with its plan to ramp up spending

• Demand slowdown: S&P Global Platts estimated Chinese oil demand growth of 1.3% in 2016 to 11.35 million barrels a day, but that was down from 6.6% growth in 2015, when price declines boosted demand.

Reuters calculated Chinese oil demand growth of 2.5% in 2016, based on official data—a three-year low—down from 3.1% in 2015.

“Two years of OPEC overproduction to defend market share and the introduction of 4.5 million barrels [from 2007-08 levels] of incremental U.S. [lower 48 states] production that transpired concurrently with a slowdown in the rate of China oil demand as well as OECD oil demand, brought us to current record inventory levels,” said Chris Kettenmann, chief energy strategist at Macro Risk Advisors.

Oil in a dangerous zone


Why oil could now be in a ‘danger zone’

Crude oil has slumped over 2 percent this year and could see more pain ahead if OPEC does not stick to production cuts it agreed upon in December.

“I think oil is in a very dangerous zone now precisely because demand is not there,” Boris Schlossberg, BK Asset Management’s managing director of foreign exchange strategy, said Wednesday on CNBC’s “Power Lunch.”
A build in crude oil inventory Wednesday as reported by the Energy Information Administration in fact sent oil higher, settling up 17 cents to $52.34.

“The irony of this whole thing is that OPEC cuts are holding, but the demand is not there. And the longer oil wallows at this $52 level, the more likely it’s actually going to go to the downside. And if it trips to $50 a barrel stops, I think it could really tumble very quickly. So I think we’re in a perilous territory,” Schlossberg said, adding that he wouldn’t be long crude oil at this juncture.

OPEC agreed in December for the first time since 2008 to cut output by 1.2 million barrels per day.

Indeed, oil has traded in a range of roughly $50 to $55 per barrel, said David Seaburg, head of sales trading at Cowen & Company. But he has a more bullish forecast.

“I think from a trading perspective here for the near term, it looks like it’s a level you probably want to step in and take a look from the long side,” Seaburg said Wednesday on CNBC’s “Power Lunch.”

Seaburg said he’d need to see more government data in coming weeks to see if the OPEC agreement is holding, but he cited hedge funds’ extreme positioning in crude oil as a positive for crude.

He said the fact that crude oil held up in Wednesday trading despite the build in inventory was a bullish near-term signal in the face of crowded long positions in the space. He said that meant investors are comfortable with where oil will be in the next three to six months. “They’re comfortable with that, therefore you probably get a trade here I think for the near-term to the upside,” he said.

The XLE, a popular energy exchange-traded fund that tends to rise and fall with the price of crude oil, is down more than 4 percent this year. ConocoPhillips, one constituent in the XLE, is set to break out of a range in which it has traded since December, said Andrew Keene of

After seeing some unusual options activity from an institutional buyer of the April 52.5 calls (which would imply a rally of nearly 6 percent by April expiration) Keene said he would buy the COP April 52.5/55 call spread for 60 cents, or $60 per options spread.

Oil prices extended losses on Tuesday

Oil prices slide after API reports 14.2 million barrel US crude stockpile increase; gasoline stocks also rise

Crude plunges off strong dollar 

Oil prices extended losses on Tuesday after an industry group reported a far larger rise in weekly U.S. crude stockpiles than anticipated.

U.S. crude oil in storage rose by 14.2 million barrels last week, according to the American Petroleum Institute. That was more than five times analysts’ forecasts for a 2.5-million barrel increase.

Gasoline stocks rose by 2.9 million barrels, compared with analysts’ expectations in a Reuters poll for a 1.1-million barrel gain.

U.S. crude was trading at $51.72 after ending Tuesday’s trade down 84 cents, or 1.6 percent, at $52.17.

Benchmark Brent crude was down $1.03, or 1.9 percent, to $54.69 a barrel by 4:50 p.m. (2150 GMT).

Concerns that U.S. gasoline consumption is stalling weighed on futures. U.S. gasoline prices fell 2.3 percent.

Commodities tomorrow:

Commodities tomorrow: Strong support for oil at $53   

Futures were pressured on Tuesday by sluggish demand and evidence of a burgeoning revival in U.S. shale production that could complicate efforts by OPEC and other producers to reduce a supply glut.

Gasoline stockpiles rose by almost 21 million barrels in the first 27 days of 2017, compared with an average increase of less than 12 million barrels at the same time of year during the previous decade, according to official inventory data.

“It’s a supply-driven setback … We are within 2 million barrels of the record in U.S. gasoline stocks that we saw last February,” said Tony Headrick, energy markets analyst at CHS Hedging. “A strong build in inventory reports could weigh on gasoline in a seasonal timeframe where gasoline demand is weak.”

Inventory estimates from trade group the American Petroleum Institute are due on Tuesday afternoon. U.S. government data is reported Wednesday.

Gasoline futures fell below the 200 day moving average on a continuous chart, Headrick noted.

The U.S. dollar rose 0.4 percent against a basket of currencies, making dollar-denominated commodities like crude oil more expensive to holders of other currencies.

Prices have been supported for two months as the Organization of the Petroleum Exporting Countries and other exporters have tried to cut output by almost 1.8 million barrels per day (bpd) in the first half of 2017. OPEC and Russia have together cut at least 1.1 million bpd so far.

Another bullish sign emerged on Tuesday as crude oil exports from southern Iraq fell in January to 3.275 million barrels per day (bpd) from 3.51 million bpd in December, according to two oil executives.

Iraq, OPEC’s second largest producer, has been a concern among analysts because it has a harder time managing output than some other cartel members. Its leaders also raised issues with the coordinated production cuts from their inception.

‘Encouraging’ signs that OPEC production has been cut back: IEA

‘Encouraging’ signs OPEC production has been cut back: IEA   

But market players are concerned that rising U.S. production and signs of slowing demand growth could offset these efforts.

“The general perception is that OPEC is cutting production, which is supporting prices, but high stock levels, rising rig counts and growing U.S. production are capping gains,” said Tamas Varga, analyst at London brokerage PVM Oil Associates.

Societe Generale oil analyst Michael Wittner said U.S. shale oil output was recovering faster than expected.

“Rig counts are increasing at an accelerating pace, and given the technological advances of the past three years, this should translate into significant supply,” Wittner said.

“U.S. shale is coming back, and it’s coming back strong.”

U.S. oil production is expected to rise 100,000 barrels per day to 8.98 million barrels in 2017, 0.3 percent less than previously forecast, according to a monthly U.S. government report released on Tuesday.

Chinese oil demand grew in 2016 at the slowest pace in at least three years, Reuters calculations showed, the latest sign of slower demand from the world’s largest energy consumer.

Correction: This story has been corrected to reflect the total stockpile build reported by API was 14.2 million barrels.

— CNBC’s Tom DiChristopher contributed to this report.

US Crude Oil Up 29 cents


US crude settles at $53.83, up 29 cents, after US Treasury imposes sanctions on Iran

Oil prices gave up much of their gains after jumping on Friday as the United States imposed sanctions on some Iranian individuals and entities, days after the White House put Tehran “on notice” over a ballistic missile test.

Front month U.S. West Texas Intermediate crude futures settled 29 cents higher at $53.83 a barrel. For the week, the contract was up about 1 percent.

Brent crude futures were up 24 cents at $56.80 a barrel by 2:34 p.m. ET (1934 GMT). Brent was on track to gain about 2 percent on the week, its first significant weekly rise this year.

Volume in U.S. crude futures was relatively low on Friday, with about 335,000 contracts changing hands by 12:15 p.m., on track to fall short of the 200-day moving average for 528,000 contracts.

This is the first move by the administration of President Donald Trump against Iran. It follows his vows during the 2016 campaign to get tough on Tehran.

Shuaiba oil refinery south of Kuwait City, Kuwait.

Iran relationship a black swan for oil?   

Under the sanctions, announced by the U.S. Treasury, 13 individuals and 12 entities cannot access the U.S. financial system or deal with U.S. companies.

A senior U.S. administration said Friday’s sanctions were an “initial step” in response to Iran’s “provocative behavior,” suggesting more could follow if Tehran does not curb its ballistic missile program and continues support for Houthi militia in Yemen.

The news added to volatility in what had already been a day of choppy trading. Analysts said the market is torn between promised cuts from the Organization of the Petroleum Exporting Countries and fears over rising U.S. shale oil production.

“While the market is taking these actions in stride so far as unlikely to result in a larger military conflict that would put Persian Gulf crude oil supplies at risk, the odds of that scenario are certainly higher than a week ago,” wrote Timothy Evans, energy analyst at Citi Futures in New York.

Trump had warned on Twitter that “Iran is playing with fire” after its missile test.

“The ‘trumperament’ of the new U.S. president is being tested by Iran and soon maybe also by Russia and China,” said Olivier Jakob, managing director of consultancy PetroMatrix. “And that is adding some geopolitical support to crude oil.”

Here's how to play a rally in crude

Here’s how to play a rally in crude   

Comments by Russian energy minister Alexander Novak that oil producers had cut their output as agreed under a deal with OPEC, also helped to support prices, analysts said.

Novak said that Russian companies might cut oil production more quickly than required by its deal with late last year. He said that 1.4 million barrels per day (bpd) was cut from global oil output last month as part of the deal.

Oilfield services firm Baker Hughes reported U.S. drillers added 17 oil rigs in the last week. The count has been recovering since June and now stands at 583 rigs, compared with 467 rigs last year.

Analysts said oil’s advance could run out of steam quickly. PVM Oil Associates noted the market “is sandwiched between supportive OPEC-led output cuts and the bearish impact of a resurgence in U.S. crude production.”

The prospect of more oil output from Nigeria and also from other non-OPEC producers such as Brazil also looms.

“Record speculative length threatens to trigger a sharp price fall as unease builds amid the ongoing wait for a conclusive upside breakout,” Commerzbank said in a note.

— CNBC’s Tom DiChristopher contributed to this report.

New report shows rising oil and gas industry confidence


New report shows rising oil and gas industry confidence


Offshore staff

HOUSTON – Despite the drawn-out recovery, confidence in oil and gas industry prosperity has risen over the past year among its US-based senior professionals according to new research conducted by DNV GL. Some 45% of the US respondents said they feel confident in the industry’s prospects for the year ahead, compared with only 27% at the start of 2016.

“Short-term agility, long-term resilience” is DNV GL’s seventh annual benchmark study on the outlook for the oil and gas industry. According to the international classification society, the report provides a snapshot of industry confidence, priorities, and concerns for the year ahead. The study draws on a survey of 723 senior sector players globally.

Throughout the US market, respondents reported that investments are spread across the value chain, with 42% saying they are likely to invest in upstream, 45% in midstream, and 27% in downstream for 2017. Notably, 73% believe gas will become an increasingly important component of the global energy mix over the next 10 years.

Peter Bjerager, executive vice president, director of division Americas in DNV GL Oil & Gas, commented: “We see the US oil and gas sector pushing opportunities and investments across the value chain. This shows the market’s ability to adapt and build a more robust portfolio as they position operations for the future. Our research echoes this and predicts a more positive outlook for the US market in the year ahead.”

Over the past couple of years, there has been a strong focus on the price of oil in relation to recovery. The study shows that 45% of US respondents expect the average WTI/Brent oil price to be in the range of $60-70/barrel, and 14% expect the price to be above $70/barrel, aligned with global expectations.

A more stable oil price would improve conditions for investing in oil and gas. “We are pleased to see that respondents globally consider the United States and Brazil to be the top country to invest in for 2017,” Bjerager said.

The report also indicated that US respondents will focus on both digitalization and subsea as emerging technologies in 2017.

Despite the optimism for 2017, cost management is still reported as a high priority among 82% of respondents (down 4% from 2016) and comparable with 85% globally. However, hard work paid off in 2016 and 79% of US respondents feel that they successfully achieved cost efficiency targets. Throughout the US, the key cost cutting priorities for 2017 include opex (34%) and organization restructuring (33%); these are aligned with the global picture.

“In the last two years, we saw intense short-term cost-cutting measures throughout the industry,” Bjerager added. “Though US respondents have a stronger belief that the worst of the downturn is over, restructuring and reorganization are still on the table to ensure growth and competitiveness for the long-run.”

Other key findings included:

* US respondents believe stronger oil prices will start to rebound in 2017 (41% versus 34% globally).

* US respondents (43%) see oversupply of oil and gas as a barrier to industry growth compared with 27% of sector professionals globally.

* The grip on cost control has loosened and dropped significantly from 65% in 2016 to 44%.

* The share of respondents expecting an increased focus on efficiency of assets and extending the lifespan of assets has increased significantly since last year. The share expecting increased focus on efficiency of assets in operations has risen from 34% to 41% while for life extension the percentage has grown from 29% to 36%. Both are slightly lower than the global response of 47% and 39% respectively for 2017.

* Expectations for increased overall headcount remain stable at 14%.

* The focus on cost management as a top priority in 2017 has seen a marked drop, from 38% to 23%. This is a larger fall than globally (from 41% to 34%).

* While opex and organizational restructuring are the top key priorities in both the US and globally in 2017, there is less of a focus on collaboration and supply chain savings in the US.

* 59% stated that cost pressures are driving companies to collaborate with industry participants.

* 68% understood that their business will seek to achieve greater standardization of tools and processes during 2017 – two percentage points higher than globally.