George Soros adds to Energy Stock

George Soros, the famous hedge-fund manager bought more stock of Petroleo Brasileiro SA and Potash Corp. of Saskatchewan Inc. in the fourth quarter, almost doubling its holdings.

Soros Fund Management LLC bought 16 million shares of Petrobras’ U.S.-traded stock, bringing its stake to 1.45 percent, according to a filing yesterday with the U.S. Securities and Exchange Commission. Petrobras and Potash are now the firm’s two biggest reported U.S. stocks.

George Soros is buying commodity related stocks. What we would like to know is his view on the futures oil prices. Is he buying oil through his futures brokers?

CNBC Commodities Page

CNBC now has a nice page where you can follow most commodity futures prices, like energy futures, agricultural futures, metals futures like gold and silver and commodities related ETF`s.

Beside the quotes CNBC also displays some basic commodity charts and futures charts.

A page to Bookmark if you are interested in commodity futures trading or online trading in general.

Supply Problems Ahead?

The International Energy Agency said on Monday there could be an oil market supply crunch from next year once global oil demand begins to recover.

The IEA's executive director, Nobuo Tanaka, told reporters on the sidelines of a conference in London that he expected world oil demand to resume growth from next year.

"Currently the demand is very low due to the very bad economic situation but when the economy starts growing, recovery comes again in 2010 and then onward, we may have another serious supply crunch if capital investment is not coming" ,Tanaka said.

Tanaka urged the Organization of the Petroleum Exporting Countries not to seek rapid rises in oil prices through further supply cuts.

If you do commodities futures trading you can benefit hugely from this website. The Oil Traders Blog is a good source for oil and commodities research. If you are thinking about investing in oil, this is the website for you.

Reuters/Jefferies CRB Index at a Five Year Low

An Energy Department report tomorrow will probably show U.S. crude oil inventories rose 3.2 million barrels last week, according to the median of 11 analyst responses in a Bloomberg News survey.

The Reuters/Jefferies CRB Index of 19 commodities prices fell yesterday to 203.25, the lowest since June 21, 2002, and has slipped 11 percent this year.

If you are considering commodities futures trading maybe its time to begin buying some commodity futures or commodity related stocks.

Bad Economic News in Asia sends Oil Lower

Following Monday's report that the japanese economy contracted by the most since 1973, a Reuters poll showed confidence among japanese manufacturers is near record lows and service sector sentiment fell to its worst levels ever.

Contango diminished Friday with the huge rally on ths front month future contract. If contango disappears, long term investors may begin to consider taking big long oil positions. But with this type of contango all long positions can`t be held for long because the contango, rolling yield over 15% per month will just kill you. Good for the conviction shorts, though.

Oil Traders Blog is a website for futures traders and people considering investing in oil.

Oil and Gasoline Price Divergence

The USA Today has an interesting article on this price divergence between NYMEX curde oil prices and gasoline retail prices, Low oil prices are not translating into low gas prices.

Bespoke Investment Group also performed a good analysis on this divergence:



And their respective Exchange Traded Funds performance year to date:


Last week in the Wall Street Journal, Mark Gongloff also focused on the fact that gasoline prices have stopped going down for the time being.

"This is highlighted perfectly by looking at the price charts of the oil and gasoline ETFs. In the first chart below, we provide a one-year chart of USO (oil ETF) and UGA (gasoline ETF). Even as oil prices have continued to fall in recent weeks, gasoline has diverged and gone higher. The second chart looks at the year to date change of the two commodity ETFs. As shown, USO is down 23% year to date, while UGA is up nearly 23%. This divergence is not what the consumer needs right now!" Bespoke Investment Group

Jeremy Grantham on Oil

In a recent interview Jeremy Grantham talked about the NYMEX Crude Oil Futures market and here is the transcript of the most important parts of that interview:

"(...) But what people underestimate, even in the oil industry, is how volatile the asset class is. In other words, if the trend is 65 dollars a barrel, it is fairly routine for oil to sell below half, say 30 dollars a barrel, and more than double, say 145.

And people never get that. So you don't want to be too quick to buy into weakness or sell into strength, necessarily. But it can go a long way. But below 40, I must say, I do get a bit interested. And below 30, I'm definitely a buyer." Jeremy Grantham

Watch the full Jeremy Grantham video interview with Steve Forbes here.

Major Short Covering Rally

NYMEX Crude Oil futures surged in the last trading day of the week, rallying more than 10%. A major short squeeze went through as investors bought the front month contract on the heels of 5 consecutive down days. Oil was at a 2 month low.

Some investors who had been shorting the March contract were also buying back the contract to cover their short positions before the contract expires.

Crude for March delivery ended up 3.53 dollars a barrel, or 10.4%, at $37.51 a barrel on the NYMEX.

Despite Friday's surge, the March Nymex Future contract lost 6.6 percent this week.

IEA Warns of Possible Supply Problems Down the Road

World oil demand will contract in 2009 by the most since 1982 due to extreme economic weakness around the world, the International Energy Agency printed in their monthly energy report.

Supply will be lower than previously expected this year but underlining that the world economy is risking a new price surge when demand recovers.

Global demand is expected to diminish by 980,000 barrels per day to 84,700,000 bpd in 2009 while lsat month the IEA forecasted demand to contract only by 500,000 bpd.

Supply Impact

The IEA also said that future oil supply growth has come under threat from the collapse in prices because new projects are being canceled (members of the Organization of the Petroleum Exporting Countries (OPEC) have delayed 35 new oil projects).

Since oil topped in July, the IEA has cut its estimate of potential supply in 2009 from oil producers by 1 million bpd.

"The danger is that if too much investment slips now, the scale of the price response to resurgent demand could again destabilize the global economy." David Fyfe, head of the IEA's Oil Industry and Markets Division.

Oil trading has been dominated by the bears with futures prices collapsing and the market is in deep contango, which harms Long Oil Exchange Traded Funds like United States Oil Fund.

IEA cuts Demand Forecasts for OIL

"The International Energy Agency on Wednesday subtracted 570,000 barrels a day off its 2009 world oil consumption forecast due to weak global economic activity and warned that increasing trade protectionism could further damage energy consumption.

In its latest downward demand revision, the IEA forecast world oil consumption to slow to 84.7 million barrels a day, representing a drop of one million barrels a day, or 1.1%, from 2008 and the biggest annual drop in 27 years.

Economic recession in the U.S. and many other developed nations is expected to rollback world oil consumption to 2006 levels.

In another sign of how weak demand is, total crude oil consumption in the U.S., the world's biggest consumer, is expected to fall to 1998 levels. U.S. consumption is projected at 19 million barrels a day, a 2.9% drop from last year when demand fell by more than 5%.

"We seem to be on a downward escalator we can't get off of. Until we see a bottoming out and a degree of stability on the financial and economic side, energy market weakness is going be with us for some time" said David Fyfe, editor of the IEA report." in the Wall Street Journal

Demand keeps falling and the Contango is wider again. Conditions are still favouring the bears.

Oil Down on Bank Rescue Plan

Crude Oil NYMEX futures dropped to a 3 week low on skepticism about the U.S. government’s bank rescue plan.

Oil dropped as much as 5.6% after Treasury Secretary Timothy Geithner said he is exploring a range of different structures to bail out lenders.

Later today, a U.S. government report will probably show that crude oil stockpiles increased 2.75 mln barrels last week, according to the median of 14 analyst forecasts in a Bloomberg News survey.

A Big Explosive Move Coming?

Contrary to early 2008, oil and the stock market are now marching in lock-step. As the stock market's trading range tightened, oil's has done likewiseand volatility is down.

Can we have an explosive move, up or down from these levels? A tight consolodation like this is a technical sign that a big move might occur soon. Oil is currently trading between 40 and 50 dollars a barrel. These are the support and resistance areas oil traders are watching right now. Over the last two weeks the range in oil trading has become extremely narrow.

However, in which direction this move will occur is difficult to say at this time, but I will think it will be on the upside because risky assets like the Australian Dollar and Stocks have been performing rather well lately.

Much like the stock market indexes, oil must also contend with its 50 day moving average. The first test failed, but we might test again in the next few days.

As for the ETF, USO, the price actually sits below the support area. Its trading range is between 29 and 40 dollars a barrel with an huge surge in volume over the last several weeks. Are long term buyers beginning to accumulate?

OPEC is Cutting But Not Fast Enough

OPEC is cutting but not fast ebnough to catch up with the US demand destruction:

"The Organization of Petroleum Exporting Countries cut crude-oil output by nearly 1.3 million barrels a day in January in an attempt to tame the supply glut that is anchoring prices near 40 a barrel.

But as the cartel tightened the taps, crude-oil inventories in the U.S. were increasing by 700,000 to 900,000 barrels a day. That growth rate, the most seen in the month of January in 85 years and the highest in any month since at least October 2002, is a setback to OPEC's efforts." in the Wall Street Journal


Oil futures are trading higher today with the USO (United States Oil Fund), the most liquid oil ETF rising 3%.

Inflation Adjusted Record Low for Oil is 18.90 USD in 1986

Some analysts predict oil prices could fall to as low as 25 dollars a barrel in the second quarter comparing to the inflation-adjusted record low for Nymex oil is at 18.90 dollars a barrel, hit on April 1, 1986.

In non-adjusted dollar terms, that low was 9.75 dollars a barrel, the only time in NYMEX history that oil fell below 10 dollars a barrel.

When trading crude oil futures or oil ETF`s always look to trade with very low comissions and spreads, otherwise you will completely deplet your trading account.

United States Oil Fund reaches Record Investment Levels

Retail investors have poured record amounts of money into oil ETFs.

Investment Data showed investment in oil ETFs like USO, DBO and OIL, a easy way to invest in oil for retail investors, has reached record levels. The number of crude futures contracts held by the United States Oil Fund the largest oil ETF, hit a record high near 80,000 recently.

Oil Has Its Biggest Annual Fall Ever in 2008

Last year, the commodity proved one of the best ways to earn a lot of money - and then, to lose it all. After hitting a record high of 147 a barrel in July, oil fell more than 100 bucks, or 70% by year-end. It closed 2008 down 54%, its biggest loss ever and more than the stock market's enormous slide.

Oil is Down 10% Year to Date

Trading in the first months of this year also didn't bode well for oil bulls. Crude has lost 10% so far this year, compared with a 5% loss in the Reuters/Jefferies CRB commodities index, and a 4% gain in gold prices. Oil is clearly underperforming other commodities and risky assets.

On Friday, crude oil futures fell more than 2 percent on the NYMEX after the U.S. reported a 16-year high unemployment rate and the biggest loss in non farm payrolls in decades.

Inflation Adjusted Record Low for Oil is 18.90 USD in 1986

Some analysts predict oil prices could fall to as low as 25 dollars a barrel in the second quarter comparing to the inflation-adjusted record low for Nymex oil is at 18.90 dollars a barrel, hit on April 1, 1986. In non-adjusted dollar terms, that low was 9.75 dollars a barrel, the only time in NYMEX history that oil fell below 10 dollars a barrel.

USO Oil ETF still Below 10 Day EMA

The most active oil ETF is still trading below its 10 day Exponencial moving average. I am looking forward to buy on the crossover. Risky assets like the australian dollar, stocks, copper are being bought in the last few trading sessions.

The stage is set for an Oil Rally.