These are two charts we included in out technical report last evening. They show how the money supply has exploded in the last few months. But the left chart shows that the increase in stimulus has yet to be filtering through the economy as the velocity of money is in a bear market. However, that bear market is drawing to a close. Inflation is six to months months away before starting to nimble on the upside. To that end the oil charts are looking quite bullish long term. There will be dips along the way but they will be supported. The managed futures community has increased their long holdings of WTI to 180,000 up from 100k in the last month. It will provide the fodder for the dip.
CRUDE: Hi: 95.36; Low: 95.05
Ouch, volume is very light. The markets are generally lower in light profit taking. This was the same type of open interest increase as was seen in the push to 100.42 in 2012. It will end in sorrow and that point is approaching. That does not mean the end to the larger degree pattern, but it does mean the end of the medium degree thrust. Our model suggests that March will continue to ease lower. There will be support at 94.65 to 94.50. The minor downside pivot is 94.35. The key downside pivot to the short-term pattern is 92.65. The key downside pivot to the intermediate term picture is a daily settle below 91.52. March will have minor resistance Monday at 95.50. The minor upside pivot is 95.65. March marks the key upside pivot at 96.55. Yes, there can be a marginal new high to finish this pattern as an alternate model. We are a cautious seller of the rally with a tight stop.
BRENT Hi: 111.99; Low: 111.51
North Sea maintenance is due to begin in March and that will support this market to the detriment of the WTI for the short-term. Nevertheless, it appears that March has completed a leg to the upside with the marginal new overnight at at 111.99. that will be the key upside pivot to this model for Monday. It is likely that March sees minor profit taking to drop March to 110.90 to 110.60. The minor downside pivot is 110.45. The key downside pivot is 109.30. It is likely that the 110.90 to 110.80 area holds for the day.
MOGAS: HI: 2.7996; Low: 27806
We noted in our Monday report that Feb was seen likely to pull back from the 2.0850 area. This will result in minor profit taking that will lead Feb to 2.7650 to 2.76. The minor resistance is 2.7950 to 2.80. We are a cautious seller of the rally. The stop above 2.8050. The key upside pivot to the continuation chart is 2.84, but the key upside pivot to the Feb chart is 2.82.
Dist: Hi: 3.05365; Low: 3.0439
This market appears to be firmer in its very short-term pattern. Nevertheless a little profit taking to 3.0375 to 3.03 would not be surprising. The minor downside pivot is 3.0230. Feb will have a minor upside pivot aT3.0575. Moving above that mark will signal a rush to the key upside pivot at 3.0775. A daily settlement above that level is a bullsih indicator. The key downside pivot is 2.98.
NAT: Hi: 3.607; Low: 3.5666
It is too juicy a prize for the bulls not to attempt a rise to 3.75. Indeed there is the .618 retracement to get through at 2.61, but the intraday chart suggests that is probable. There will be minor support at 3.55 to 3.54. The minor downside pivot is 3.49. The key downside pivot is 3.38. buy the early dip with the appropriate stop or sell the 3.74 area with a stop above 3.76.
It appears that March has completed a minor corrective leg to the downside at -16.00, which was our initial target for the correction. In a light market March may retrace to the 15.35 to -15.15 zone. The upside pivot is -14.90. There will be minor support at -16.50 to -16.60 should the overnight low break. That was seen at -16.07.
GASOIL: Hi: 936.50; Low: 959.75
Feb completed its leg to the upside at 966.50. Since that time it has been working in a congestion pattern. That formation is likely to have a minor leg to the downside before the correction is complete. This model has Feb falling to 945.00 to 944.00. That will be signaled with a break of 953.00. The key upside pivot is 966.50. The minor upside pivot is 964.00.
A bitter defeat for Merkel months before German election
(Reuters) – In an extremely tight German state election that seemed to produce few clearcut winners, there was no argument over who the biggest loser was — Chancellor Angela Merkel.
Her Christian Democrats (CDU), led by rising star David McAllister, had convinced themselves over the past week that they were on the verge of a stunning come-from-behind victory in Lower Saxony, a major agricultural and industrial region that is Germany’s closest approximation to a swing state.
But on Sunday, they came up agonizingly short, losing power to the centre-left Social Democrats (SPD) and Greens, who together garnered just one more seat in the state assembly than the centre-right.
The defeat is a bitter one for Merkel, even if she remains a strong favorite to win a third term in a federal election eight months from now.
In one fell swoop, it gives the centre-left a majority in the Bundesrat upper house of parliament, meaning the opposition can block major legislation from Merkel’s government and initiate laws themselves.
“I assume it won’t be possible to push anything through the Bundesrat that the SPD doesn’t want,” Volker Kauder, a Merkel ally and leader of her CDU in parliament, told German public television on Monday morning.
That will not change after the national election in September, even if Merkel’s centre-right coalition with the liberal Free Democrats (FDP) manages to hold onto power.
In the run-up to the federal vote, Merkel’s room for manoeuvre will be limited and the notoriously risk-averse German leader may take a more cautious stance on a range of policy issues, including her management of the euro zone debt crisis.
The vote is also a blow to McAllister, the 42-year-old half-Scot who had ruled Lower Saxony since 2010 and become a protege of the chancellor, declaring on the eve of the vote that he was happy to be “Merkel’s Mac”.
There will be much hand-wringing in the CDU about McAllister’s not-so-subtle hints to supporters in the weeks before the election that they use their votes to boost the score of the FDP.
His message resonated with CDU voters, but perhaps stronger than he would have liked.
The FDP, which had been expected to struggle to make the 5 percent threshold needed to enter the state assembly, ended up with a surprisingly strong score of 9.9 percent, largely thanks to CDU backers who split their two votes (in German elections voters cast ballots for both a party and a local candidate).
Yet the FDP’s strong showing appears to have come at the expense of McAllister’s CDU, which scored 36 percent, down 6.5 points from their last result in Lower Saxony in 2008 and well below the 40 percent-plus that opinion polls had forecast.
With the loss, Merkel’s CDU has now lost to the SPD and Greens in five states over the past two years, including in their longtime southern stronghold of Baden-Wuerttemberg and in Germany’s most populous state, North Rhine-Westphalia.
The string of losses is likely to fuel anxiety about Merkel’s ability to leverage her own popularity into votes for her party.
“The state election in Lower Saxony should be a warning for Angela Merkel for the federal election in the autumn,” conservative daily Die Welt wrote on Monday.
The FDP were hailed as the big winners of Sunday’s vote, but the result failed to silence internal critics who want to jettison national party leader Philipp Roesler before the federal vote.
Leading Roesler critic Dirk Niebel, who serves as development minister in Merkel’s government, said the Lower Saxony surprise could not mask the FDP’s problems at the national level and demanded a special party congress in May to debate its leadership.
The SPD will take some satisfaction from having ousted loyal Merkel ally McAllister, but the narrow victory does not give them the major boost in momentum they had been hoping for heading into the national vote.
Instead it highlighted the problems of their own chancellor candidate Peer Steinbrueck, who on Sunday accepted responsibility for weakening the party’s score in Lower Saxony with a series of verbal blunders.
Just as with Roesler in the FDP, the result is unlikely to quiet voices within the SPD who have begun questioning Steinbrueck’s suitability as a challenger to Merkel.
The only party that came out an undisputed winner from Lower Saxony was the Greens, who with 13.7 percent of the vote scored their best ever result in the state. But without a stronger performance from the SPD, their natural allies, the environmentalist party has little hope of dislodging Merkel as they did McAllister.
“We are doing our part,” said Greens leader Cem Oezdemir. “But the SPD needs to look closely at how they can improve their own score.”
U.S. Oil-Production Rise Is Fastest Ever
By TOM FOWLER
U.S. oil production grew more in 2012 than in any year in the history of the domestic industry, which began in 1859, and is set to surge even more in 2013.
Daily crude output averaged 6.4 million barrels a day last year, up a record 779,000 barrels a day from 2011 and hitting a 15-year high, according to the American Petroleum Institute, a trade group.
It is the biggest annual jump in production since Edwin Drake drilled the first commercial oil well in Titusville, Pa., two years before the Civil War began.
The U.S. Energy Information Administration predicts 2013 will be an even bigger year, with average daily production expected to jump by 900,000 barrels a day.
The surge comes thanks to a relatively recent combination of technologies—horizontal drilling and hydraulic fracturing, or fracking, which involves pumping water, chemicals and sand at high pressures to break apart underground rock formations.
Together, they have unlocked deposits of oil and gas trapped in formations previously thought to be unreachable.
Everett CollectionThe 2012 rise in crude output was the largest since U.S. oil production began in 1859 at a well owned by Edwin Drake (right) in Titusville, Pa.
That has meant a resurgence of activity in well-established oil regions, such as West Texas’s Permian basin, as well as huge expansions in areas that had been lightly tapped in the past, such as North Dakota’s Bakken shale region.
The Bakken has gone from producing just 125,000 barrels of oil a day five years ago to nearly 750,000 barrels a day today.
The benefits of the surge in domestic energy production include improving employment in some regions and a rebound in U.S.-based manufacturing.
“At a very basic level this surge is creating jobs and wealth that didn’t exist before,” said Michael Levi, a senior fellow for energy and the environment at the Council on Foreign Relations.
It has also provided the county with greater defense against overseas turmoil that can disrupt energy supplies.
“The events in Algeria this week, for example, show the importance of having rising production from within the U.S. and other countries,” said Amy Myers Jaffe, the executive director of energy and sustainability at the University of California Davis.
The shale drilling boom was first directed at natural gas production, but when a glut of natural gas drove down prices for the fuel, exploration companies redirected their efforts toward oil.
Amid a sluggish economic recovery and tightening fuel-economy standards for U.S. cars and trucks, oil demand fell to a 16-year low in 2012, according to the trade group. Total oil imports for the year fell by 6.9%, to a 15-year low, API said.
Refiners that spent billions of dollars upgrading and expanding facilities last decade now find themselves with excess capacity, leading them to target consumers in South America and elsewhere for their surplus diesel and gasoline production.
Exxon Mobil Corp. XOM +0.67% predicts in its annual energy outlook that North America will become a net exporter of all energy by 2025, through continued growth of crude from Canada’s oil-sands region as well as growing exports of gasoline and diesel.
Continuation of the production trend isn’t a given, experts say, noting that the industry must continue to improve on its exploration-and-production technology, particularly as it continues to move into areas that are more heavily populated, or else it could face greater regulatory resistance. Environmental concerns remain a significant issue as the technology expands.
U.S. crude production won’t necessarily mean significantly lower gasoline prices, which will still be influenced by global markets.
But the domestic-production surge is already having a dramatic impact on the refining business, which in the past had been focused on handling hard-to-refine crude imported from overseas.
Earlier this month, San Antonio-based refiner Valero Energy Corp. VLO -0.16% said it will add new equipment to a Houston-area plant to handle a very easy-to-refine type of oil from South Texas’ Eagle Ford shale oil fields.
“No one has installed that equipment on a U.S. refinery in years,” said Philip Verleger, an energy economist.
Iran says progress made in U.N. nuclear talks
(Reuters) – Iran said it had made some progress in resolving its disputes with the U.N. atomic watchdog, state media reported, even though the two sides’ latest talks failed to seal a deal on letting inspectors visit a military site.
The Islamic state and the International Atomic Energy Agency (IAEA) met this week, but did not manage to revive an investigation into Iran’s suspected nuclear arms research, the U.N. organization’s officials said on Friday.
Iran’s ambassador to the body, Ali Asghar Soltanieh, later said some progress had been made in the talks, Press TV reported.
“We had two days of intensive talks and we were able to in fact bridge the gap to some extent,” Soltanieh was quoted as saying late on Friday.
“There was agreement with the agency about some issues, but no document has been signed yet … In terms of getting views closer together and resolving some disputes the negotiations with the agency were successful,” he told state news agency IRNA.
Soltanieh, however, stuck to Iran’s stance that it would not stop uranium enrichment “for a second”.
The West suspects Iran is working to develop the ability to make nuclear bombs – an accusation dismissed by Tehran which says its atomic work is focused on generating electricity and other peaceful projects.
Israel, a U.S. ally believed to harbor the Middle East’s sole nuclear arsenal, has threatened to bomb Iranian nuclear sites if it judges diplomacy and sanctions meant to curb Iran’s uranium enrichment program to have failed irretrievably.
IAEA inspectors want to get into Iran’s Parchin military complex where they believe explosives tests relevant to nuclear weapons development may have taken place. Iran denies the allegation.
Further talks are scheduled on February 12 between Iran and the IAEA – an organization set up to prevent the spread of nuclear weapons.
THERE ARE NO DATA POINTS FOR MONDAY
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