Thursday October 02, 2014

DAILY ENERGY COMPLEX COMMENTARY

10/02/14
WTI Crude Oil into new low for the move on Saudi price cut & building global
supplies.
OVERNIGHT CHANGES THROUGH 6:05 AM (CT):
CRUDE -191, HEATING OIL -408, UNLEADED GAS -467
CRUDE OIL MARKET FUNDAMENTALS: November Crude Oil prices pushed into a
new low for the move during the early morning hours, weighed down by a surprise
price cut by Saudi Arabia. There also remains concern over a lackluster global
growth environment following a round of softer manufacturing data points during the previous session. Reports that
Saudi Arabia cut their official selling price for November by more than expected seemed to tamp down expectations for
a reduction in output at the November OPEC meeting. This has some in the trade suggesting that OPEC could be
adjusting policy to counteract falling prices. An added factor weighing on the crude oil market is the active production
pace in Libya, which contributes to abundant supply concerns. The crude oil market was able to push toward the
$93.00 area during yesterday's session, helped by weekly EIA inventory data that showed an unexpected decline in
US crude oil supplies of 1.36 million barrels. EIA crude stocks are 7.097 million barrels below year ago levels, but
stand 4.017 million barrels above the five year average. Some traders were encouraged by the drawdown in US crude
supply last week even in the face of a pullback in refinery activity back below the 90% level, as well as a rebound in
imports. EIA crude oil imports for the week stood at 7.284 million barrels per day compared to 6.870 million barrels the
previous week. The refinery operating rate was down 3.6% to 89.8%, which compared to 89% last year and the fiveyear average of 86.6%. In the meantime, ongoing concern over building global oil supplies and demand concerns in
Europe and Asia keep the fundamental edge in favor of the bear camp. Price action in November WTI Crude Oil also
favors the bear camp, especially, helped by a build in open interest during Tuesday's downdraft, with added followthrough yesterday and this morning. November Crude Oil has support coming in at its 2014 low at $87.85.
PRODUCT MARKET FUNDAMENTALS: November RBOB Gasoline enters the US trading hours at a new low for the
move and below the $2.40 area. Sharp downside action in both Brent and WTI Crude Oil, combined with demand
uncertainty contributes to the decline. The market showed negative reversal action during the previous session and
posted an inside day trading range in the process. The market was able to make a brief push above $2.50 in the wake
of EIA inventory data that showed a larger than expected drawdown in US gasoline supplies last week of 1.836 million
barrels. Average total gasoline demand for the past four weeks was down 0.71% compared to last year. The break in
November RBOB indicates that focus is on macro fundamentals more than specific supply issues. This is highlighted
by weaker price action in the face of a larger draw down in US supplies and ongoing refinery issues in Texas. The
price trend in November RBOB favors the bear camp, with the next area of support coming from the April 2013 low of
$2.3468. Meanwhile, November Heating Oil prices rallied to their high of the session in response to yesterday's EIA
data showing a hefty decline in US distillates last week. EIA distillate stocks fell 2.894 million barrels and stand at
3.478 million barrels below last year and 25.178 million below the five-year average. Average total distillate demand for
the past four weeks was up 0.75% compared to last year. EIA heating oil stocks fell 270,000 barrels and are 4.278
million barrels below last year and 24.144 million below the five year average. Support for November Heating Oil
comes in at its contract low at $2.5997.
TODAY'S ENERGY MARKET GUIDANCE: November Crude Oil prices plunged into a new low for the move, which
keeps the bear trend intact. Added downside follow-through in the market comes with ongoing demand concerns in
Europe and Asia, as well as reports that Saudi Arabia lowered their official selling prices. Of particular interest to the
crude oil complex in the coming session is the press conference from Mario Draghi and potential for more aggressive

quantitative easing measures. A supportive feature for the crude oil market that so far has been overlooked is the
weakness in the US dollar. Further weakness there could provide bargain-hunters a source of cover for a turn higher.
The bear camp remains in control in November Crude Oil with support at $87.85.

Weekly EIA Petroleum Report

CRUDE OIL

In Million Barrels
Stocks

Imports Refinery Capacity(%)

Week Of

Current Weekly Change Yearly Change 5 Year Average Current Current

9/26/2014

356.635

-1.363

DISTILLATES

-7.097

352.618

Stocks

7.284
Imports

89.8

Current Weekly Change Yearly Change 5 Year Average Current Current

9/26/2014

125.701

GASOLINE

-3.478

150.879

Stocks

0.031
Imports

4.117

Current Weekly Change Yearly Change 5 Year Average Current Current

9/26/2014

208.488

-11.242

212.747

0.504

Year Ago
3.831

Demand

Week Of

-1.836

89

Demand

Week Of

-2.894

Year Ago

8.66

Year Ago
8.527

NATURAL GAS: November Natural Gas prices registered a lower low during the early morning hours, but managed to
hold above the $4.00 level. The market pushed into a new high for the move early in yesterday's session at $4.184, but
ended with a bearish outside-day reversal. Concerns that this morning's weekly EIA storage report could show another
above-average injection, somewhere in the range of 105 bcf, triggered some profit-taking. An added drag on the
natural gas market is the latest 6-day to 10-day weather maps, which show a smaller area of below-normal
temperatures over the Great Lakes region going into October 11th. Meanwhile, the Henry Hub next-day cash market
held steady, while the New York Transco Z6 market rallied during yesterday's session, and that provides a source of
support for the November contract. The near-term trend for November Natural Gas continues to support the bull camp,
with support coming in at $3.975.
TODAY'S MARKET IDEAS:
Aggressive bulls in November Natural Gas might consider buying the November 4.10 Calls on a setback toward 0.085,
positioning for another leg higher in the November futures toward $4.39.
NEW RECOMMENDATIONS:
None.
PREVIOUS RECOMMENDATIONS:
None.
OTHER ENERGY CHARTS:

ENERGY COMPLEX TECHNICAL OUTLOOK:

Note: Technical commentary is based solely on statistical indicators and does not necessarily correspond to any fundamental analysis that may
appear elsewhere in this report.

CRUDE OIL (NOV) 10/02/2014: Momentum studies trending lower at mid-range should accelerate a move lower if

support levels are taken out. The market's short-term trend is negative as the close remains below the 9-day moving
average. The market tilt is slightly negative with the close under the pivot. The next downside objective is now at
88.77. The next area of resistance is around 92.04 and 93.74, while 1st support hits today at 89.56 and below there at
88.77.
HEATING OIL (NOV) 10/02/2014: The stochastics indicators are rising from oversold levels, which is bullish and
should support higher prices. The close below the 9-day moving average is a negative short-term indicator for trend. It
is a slightly negative indicator that the close was under the swing pivot. The near-term upside target is at 271.81.
Some caution in pressing the downside is warranted with the RSI under 30. The next area of resistance is around
268.81 and 271.81, while 1st support hits today at 263.67 and below there at 261.52.
RBOB GAS (NOV) 10/02/2014: Declining momentum studies in the neutral zone will tend to reinforce lower price
action. A negative signal for trend short-term was given on a close under the 9-bar moving average. The market tilt is
slightly negative with the close under the pivot. The next downside objective is now at 238.74. The next area of
resistance is around 248.33 and 252.71, while 1st support hits today at 241.35 and below there at 238.74.
NATURAL GAS (NOV) 10/02/2014: Momentum studies are rising from mid-range, which could accelerate a move
higher if resistance levels are penetrated. The market's close above the 9-day moving average suggests the short-term
trend remains positive. A negative signal was given by the outside day down. The defensive setup, with the close
under the 2nd swing support, could cause some early weakness. The next upside target is 4.230. The next area of
resistance is around 4.110 and 4.230, while 1st support hits today at 3.944 and below there at 3.897.

DAILY TECHNICAL STATISTICS

9 DAY
RSI

14 DAY
RSI

14 DAY
SLOW
STOCH D

CLOSE
ENERGY COMPLEX
HOAZ4
266.47
21.27
26.32
16.33
RBAZ4
239.50
31.92
34.53
29.15
90.80
40.48
41.89
55.95
CLAX4
CLAZ4
89.79
38.11
39.91
51.84
HOAX4
266.24
28.05
30.46
17.44
244.84
38.55
39.95
39.18
RBAX4
NGAX4
4.027
51.52
51.32
65.11
NGAZ4
4.094
50.03
50.28
64.41
Calculations based on previous session. Data collected 09/30/2014
Data sources can & do produce bad ticks. Verify before use.

14 DAY
SLOW
STOCH K

4 DAY
M AVG

9 DAY
M AVG

18 DAY
M AVG

45 DAY
M AVG

60 DAY
M AVG

17.37
27.10
46.52
41.19
18.02
30.89
68.28
67.29

2.70
2.44
92.52
91.54
2.68
2.47
4.08
4.16

2.70
2.45
92.16
91.38
2.69
2.50
4.00
4.08

2.74
2.46
92.14
91.47
2.73
2.50
3.99
4.07

2.82
2.52
93.67
93.17
2.81
2.54
3.98
4.07

2.85
2.55
95.21
94.66
2.83
2.57
3.99
4.07

DAILY SWING STATISTICS

Contract
Support 2
ENERGY COMPLEX
HOAZ4
Heating Oil
259.48
RBAZ4
RBOB Gas
231.19
CLAX4
Crude Oil
88.76
CLAZ4
Crude Oil
87.77
Heating Oil
261.51
HOAX4
RBAX4
RBOB Gas
238.73
NGAX4
Natural Gas
3.896
Natural Gas
3.966
NGAZ4
Calculations based on previous session. Data collected 09/30/2014
Data sources can & do produce bad ticks. Verify before use.

Support 1

Pivot

Resist 1

Resist 2

262.49
234.68
89.55
88.55
263.66
241.34
3.943
4.012

267.44
240.83
91.25
90.25
266.66
245.72
4.063
4.129

270.45
244.32
92.04
91.03
268.81
248.33
4.110
4.175

275.40
250.47
93.74
92.73
271.81
252.71
4.230
4.292

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