PFGBEST Futures Training Division

The Full Faith and Credit

Energy Market Comments

by Phil Flynn, PFGBEST

1-800-935-6487

pflynn@PFGBEST.com

Wednesday, April 25, 2012 at 7:40 AM

The Energy Report for Wednesday, April 25, 2012

By Phil Flynn 800-935-6487

It is Fed Day and what better day to talk about the Federal Reserve’s impact on oil price than Fed Day itself. As we all know, the Federal Reserve has taken historic actions to try to keep our economy afloat, yet if you think there are not consequences to Fed action, then you are not paying attention. As the outcry against speculators and speculation reach dizzying heights, a study of Fed action and their direct correlation to the increase in volume and open interest as well as price, is quite clear. As the critics of speculation decry the massive surge in oil, there is only the Fed to blame.

In a world of quantitative easing and historic global stimulus, investors have more and more confidence in the price of oil than they do in government bonds. The reason is clear and that is because there is a high risk of losing money when you buy US government bonds as compared to the possible rate of inflation. Concerning government bonds across the globe, either the risk is too high or the yield is too low. This is a fundamental reason why money has flowed into oil. Investors have more faith in oil than they do some banks or governments.

Now if you think that by trying to restrict money from reflecting this fundamental fact will somehow make oil cheaper, then you are sadly mistaken. In fact oil futures will become even more coveted by those who are allowed to get them and others will seek different ways to participate in a market that viewed by open interest growth has more credibility than bond markets in say Greece or Spain. If you think the fundamentals of negative interest rates or default risk will change by raising margin requirements, you are in denial of the real fundamentals of the global economy and the oil market.

Some of the moves we’ve seen in the oil market are based on Fed action and they are quite clear yet others are more opaque. The Federal Reserve has a desire to increase oil prices to avoid the look of deflation. The Fed and their policies have pumped up oil prices as quantitative easing is as simulative to the economy as an interest rate cut and it means that interest rates are negative for investment capital to seek investment and yield. That is what the Fed wanted. It just so happens that investors looked to invest and seek yield in oil. It sends a flood of money to the emerging markets thereby stimulating more oil demand and inflation. The oil prices are reflecting this devaluing of the dollar and confidence in the full faith and credit in the United States of America which is slipping dramatically.

We do know that some of the biggest one day moves in the oil market over the last 10 years were not caused by OPEC or Libya but by Fed action and central bank comments. We saw it when the Fed cut rates in 2007 when Europe was raising them was a prime example.

We also saw an Iranian war premium build and then fall. This is not speculation. This is the market reacting to the real and growing risk to worldwide crude oil supply. This was the market reacting to the buying of real barrels of oil to prepare for an Iranian oil embargo and the possible threat of war. This is a valid fundamental reason for rising oil prices and serves an invaluable economic purpose. The market will move to ration supply and decrease demand to try to protect the economy and ensure that we will have enough oil should supply be cutoff. That’s what markets need to do. They have to be defensive and anticipate. If they did not anticipate, order could be removed from the marketplace. It could lead to shortages and disruption of supply and wild price moves. Even more wild that anything we have experienced to date.

Oil Inventories and the Fed are key today! Call for my Daily Trade Levels! See the Fed move on Fox Business where you get the Power To Prosper and me every day! Just call me – Phil Flynn – at 800-935-6487 or email me at pflynn@pfgbest.com.

There is a substantial risk of loss in trading futures and options.Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. PFGBEST, its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

SNOW JOB!

Energy Market Comments

by Phil Flynn, PFGBEST

1-800-935-6487

pflynn@PFGBEST.com

Tuesday, April 24, 2012 at 7:54 AM

The Energy Report

Natural gas pops on a last blast of snow and cold at the end of April. A nor’easter seemed to give natural gas bulls hope that perhaps a bottom may be in for natural gas or perhaps it is just a snow job. As tempting as it might be to believe in a bottom, the truth is that it’s unlikely that this last blast of winter can offer any real long term support to the natural gas market. Despite the fact that the storm dumped as much as 10 inches of snow in some cities and knocked out power in others it is still too little too late to save this poor market.

You see the problem is that natural gas supply should continue to exceed demand as liquid fuels continue to subsidize a collapsing natural gas price. Consider the report from the Energy Information Agency that showed that new well starts in the Eagle Ford region in Texas increased 110% from January through March, 2012 compared to the same period in 2011, according to reporting and analysis by BENTEK Energy LLC (Bentek). The report showed that operators started drilling 856 new wells in January through March, 2012 compared to 407 in January through March, 2011. In early April, 2012, the Eagle Ford active rig count set a new high of 217 units. The increased drilling and rig deployment translated into higher crude oil and condensate production, which is projected to average over 500 thousand barrels per day in April, up from 82 thousand barrels per day in April 2011.

Eagle Ford rigs hit a record high in April and they are producing a whopping 2 billion cubic feet of gas a day and they show no sign of slowing production. That is because they can get crude oil cheap not to mention other wet, natural gas resources.

Oil prices got hit on economic concerns from China to Europe. Spain had another bad bond auction as their yields hit the highest level since January. Yet oil is showing resilience as Iran is still a reason to not get too bearish. Iran has been hit with a cyber attack that is infecting their computers and is being hit with a from Obama to hit Syria and Iran with new sanctions. The AFP reported that Iran warned that new U.S. sanctions targeting its access to surveillance technology were “negative” and could “adversely affect its crucial talks next month with world powers over Tehran’s nuclear program”.

That is despite that fact that global inventories are bulging. Iran has tankers filled with crude that no one is buying. Even China purchases of Iranian crude has fallen 54% below year ago levels.

Bloomberg News reported that, “Global oil inventories will increase “sharply” in the first half of the year, putting pressure on prices, unless OPEC cuts production, according to the Centre for Global Energy Studies.” Stockpiles rose by 1.3 million barrels a day in the first three months of the year as output increased, marking the “first significant quarterly stock build since 2008,” the London-based center said in an e-mailed report. The Organization of Petroleum Exporting Countries may need to cut supplies by 1.5 million barrels a day by the end of year to support prices at $100 a barrel, CGES said.”

Iraqi production is soaring. Penn Energy reports that Iraq is building more export terminals. “The work and tests of the second floating oil terminal have been completed and it is ready to start loading within the coming 24 hours,” one source from South Oil Company told Reuters on Thursday. In an effort to encourage greater oil production, Iraq initiated a plan to construct four new offshore oil transportation terminals along the narrow strip of coast in the southeast of the country. Eventually, each platform would be capable of shipping as much as 850,000 barrels per day each, or 3.4 million barrels per day in total. Reuters reports that the southern oil fields in Iraq are expected to increase production by around 600,000 barrels per day over the course the year.

We are talking snow in late April! Does it not make you worry a bit about global warming? Don’t worry! MSNBC reported that British environmental guru James Lovelock, admits he was “alarmist” about climate change in the past. It is said that James Lovelock was the maverick scientist who became a guru to the environmental movement with his “Gaia” theory of the earth as a single organism now admits to being “alarmist” about climate change and says other environmental commentators, such as Al Gore, are too.

Lovelock, 92, is writing a new book in which he will say climate change is still happening, but not as quickly as he once feared. He previously painted some of the direst visions of the effects of climate change. In 2006, in an article in the U.K.’s Independent newspaper, he wrote that, “before this century is over billions of us will die and the few breeding pairs of people that survive will be in the Arctic where the climate remains tolerable.” However, the professor admitted in a telephone interview with msnbc.com that he now thinks he had been “extrapolating too far.”

In 2007, Time magazine named Lovelock as one of 13 leaders and visionaries in an article on “Heroes of the Environment,” which also included Gore, Mikhail Gorbachev and Robert Redford. “Jim Lovelock has no university, no research institute, no students. His almost unparalleled influence in environmental science is based instead on a particular way of seeing things,” Oliver Morton, of the journal Nature wrote in Time.

Of course when I questioned the panic over global warming I had the left slinging arrows. Looks like I was right the whole time.

Make sure you get it right! Tune to the Fox Business Network where you can get the Power to Prosper and me every day ! Also make sure you are getting my Daily Trade Levels! Call me – Phil Flynn – 800-935-6487 or email me at pflynn@pfgbest.com

Paranoia Will Destroy You

Energy Market Comments

by Phil Flynn, PFGBEST

1-800-935-6487

pflynn@PFGBEST.com

Monday, April 23, 2012 at 7:59 AM

The Energy Report for Monday

By Phil Flynn 800-935-6487

The left is going loony in their quest to try to gain control of everything that they haven’t already got their greedy little hands on. Their paranoia over rising oil and gas prices has started an irrational attempt to blame the free markets and capitalism as opposed to the failure of this administration to understand the technology revolution that is transforming American energy.

The latest laughable attempt to blame oil speculators for he price increase in gas comes from none other than the ill tempered ego maniac Keith Olbermann who claims that traders are increasing prices on purpose to sink Obama. This fantasy that speculators are responsible for the increase in oil price is utter nonsense and anyone that tells you otherwise does not know the facts.

This quest by the left to blame oil speculators is their latest attempt to provide cover for their President’s failed energy policy. It is their inability to admit that US energy companies have developed technology that can make the US energy independent while they have wasted millions of dollars of tax payer’s money of high risk, low (zero) return energy sources.

The Obama is losing on energy and he desperately wants you to believe that rising prices are not his fault. The left wants you to believe that the free market is the problem and they want to have the government take control. They want you to believe that the markets are being manipulated and they have guys like Olbermann carrying his water. The bottom line is that anyone that blames speculators for the price of oil is misinformed or has a political agenda. The fundamentals are clear despite Obama’s grandstanding.

The price of oil has risen due to a weak US dollar. Oil increased because of quantitative easing. Oil has increased because of the Arab spring. Oil is rising because of the Iranian oil embargo. Oil has risen as Europe and Asia hoards supply. Oil has risen because demand globally is rising. Oil increased as we drew down summertime blends of gasoline.

Oil is now falling as the risk to Iran is less and gas prices fell 4.9 cents per gallon and we are now below one year ago levels for the first time since October of 2009 according to AAA. This drop does not bolster the Olbermann augument.

Consider this Reuters piece, “President Barack Obama’s administration has brought only one new case alleging energy market price manipulation since he took office in 2009, despite more tough talk about it this week amid soaring prices at the gasoline pump.

If that seems like a lackluster enforcement record for a president eager to look assertive on oversight of oil and natural gas markets in an election year, it may be for good reason.

Experts said there is little evidence of widespread manipulation in these markets and, in any case, lawyers with experience in the field said such cases are difficult to prove.

The administration on Thursday announced a $14 million settlement with Dutch trading firm Optiver in an oil market manipulation case, but that case had initially been brought in 2008 under the administration of President George W. Bush.

With energy markets in turmoil, the market-regulating U.S. Commodity Futures Trading Commission under Bush from 2006 to 2008 brought more than a dozen energy market price manipulation cases, according to a review by Reuters.

Asked by Reuters for recent cases alleging energy market price manipulation, officials from the CFTC, the Federal Trade Commission and the U.S. Justice Department turned up only one case that has been brought under Obama.

The White House did not respond to a request for comment. The FTC received specific new authority over manipulation of the energy market in November 2009. The Justice Department said it does not keep a detailed tally of its criminal cases.

The average U.S. gasoline price per gallon was nearly $4 in early April, up about 25 cents from a year earlier, a jump that ensures plenty of rhetoric from Democrats and Republicans for months to come with the Nov. 6 elections approaching.”

Oil prices are falling today because of a weak manufacturing level in China. Iraq’s oil production is rising and in the Sudan, according to Dow Jones, they are assessing damage at its largest oil facility, Heglig, which was damaged during ten days of deadly fighting with South Sudan.

Make sure you are getting the Power to Prosper and me every day! Tune to the Fox Business Network! Also get my Daily Trade Levels! Call me – Phil Flynn -

at 800-935-6487 or email me at pflynn@pfgbest.com

‘Precautionary Demand’

Energy Market Comments

by Phil Flynn, PFGBEST

1-800-935-6487

pflynn@PFGBEST.com

Friday, April 20, 2012 at 8:13 AM

The Energy Report

By Phil Flynn 800-935-6487

Oil prices are rising early Friday and there is better than expected data from Germany and Microsoft, yet in the big picture, there are those that are saying that oil prices have risen in recent months not due to speculation but what we should call “precautionary demand”. According to Dow Jones U.S. sanctions against Iran are hurting growth in that country and creating “precautionary demand” for oil, which is part of the reason oil prices remain at current high levels according to Caroline Freund, the World Bank’s chief economist for the Middle East and North Africa.

In other words, countries have been hoarding oil in the event that oil supply might get cut. This has increased demand and prices have gone higher. It is a valid fundamental reason for oil prices to rise and has been a major factor in the pricing oil. The rise is not due to speculators, as the uninformed would have you believe, but the physical buying of extra barrels. As the Iran risk seems to be pushed back that buying has eased a bit.

Dow Jones reported overnight that European Union member states have agreed to postpone by one month the deadline for a review of the oil embargo on Iran. The EU agreed in January to implement a full oil embargo on Iranian crude oil exports by July 1 in response to its nuclear program. But as a concession, to Greece in particular, it agreed to hold by May 1 a review of the effect of a full embargo. That left next Monday’s Foreign Affairs Ministers Summit as the last opportunity to agree any change to the embargo.

However, following discussions among member states this week, Greece said it currently believed it would be able to “handle” the embargo. But it asked for the opportunity to revisit the issue, if necessary, in coming weeks and other member states agreed. Member states have agreed to postpone the May 1 review deadline until June 1.

Yet at the same time Dow Jones newswires reported that, “Iran has halted oil exports to Germany Iranian state broadcaster Press TV reported on its website, a day after a similar report about its supplies to Spain. The broadcaster Tuesday, citing people familiar with the situation, reported that Iran was considering cutting oil sales to Germany and Italy after having halted sales to Spain. Spokespeople for Germany’s federal economics ministry couldn’t immediately comment on the matter Wednesday. The impact on the German economy from any halted oil imports from Iran, however, should be limited given that Iranian oil deliveries account for only a fraction of total imports. In January, Iranian oil imports to Germany were virtually zero, according to statistics published on the website of Germany’s Federal Office of Economics and Export Control. In February, Iranian oil imports to Germany were around 31,000 metric tons, according to that data. In 2011, Germany imported around 821,000 tons of crude oil from Iran, out of a total of 90.52 million tons of crude oil imports.”

Reuters News reported that, “U.S. President Barack Obama’s bid to dampen the influence of oil speculators by having regulators set trading margins could backfire, potentially making prices even more volatile and leaving crude dominated only by those with the deepest pockets. Under Obama’s request to Congress, the Commodity Futures Trading Commission (CFTC) would determine how much speculators need to pay to trade U.S. crude oil futures, in theory increasing the amount when prices move too far, too fast. But economists and traders cautioned that pushing smaller investors out of markets would only hand greater influence to the largest hedge funds and Wall Street banks. Ultimately, there may not be enough traders left to do business with oil producers and consumers looking to hedge their needs.”

Make sure you are getting the Power to Prosper and me every day! Tune to the Fox Business Network! Also make sure you subscribe to my Daily Trade Levels! Just call me – Phil Flynn – at 800-935-6487 or email me at pflynn@pfgbest.com

Big Drop and Euro Flop

Energy Market Comments

by Phil Flynn, PFGBEST

1-800-935-6487

pflynn@PFGBEST.com

Thursday, April 19, 2012 at 7:21 AM

The Energy Report

By Phil Flynn 800-935-6487

Oil price took a hit as oil inventories rose much more than expected and fears of a euro bond flop permeated the marketplace.

The Energy Information Administration set the negative tone by reporting U.S. commercial crude oil inventories increased by 3.9 million barrels from the previous week. At 369.0 million barrels, U.S. crude oil inventories are in the upper limit of the average range for this time of year. Total motor gasoline inventories decreased by 3.7 million barrels last week and are in the upper limit of the average range. Both finished with gasoline inventories and blending components inventories decreasing last week. Distillate fuel inventories decreased by 2.9 million barrels last week and are in the middle of the average range for this time of year. The EIA said that U.S. crude oil imports averaged 8.7 million barrels per day last week, up by 196 thousand barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged nearly 9.1 million barrels per day, 395 thousand barrels per day above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 427 thousand barrels per day. Distillate fuel imports averaged 119 thousand barrels per day last week.

Oil also was hit by concerns surrounding Europe as well. The Spanish bond auction went ok. The AP reported that the interest rate, or yield, on the 10-year bond was 5.7 percent, up from 5.3 at the last auction on April 4. Demand was more than double the amount sold, down from about triple at the last auction. On the shorter-term notes, the bid to cover ratio was 3.3 this time while the average yield was 3.5 percent.

From the bigger picture, oil should be near the lower end of the trading range. The $100.00 a barrel area should hold until the May Iranian meeting. You may want to do some option trades accordingly. Call me and I can help.

Call for my latest trades an to get a trial to my Daily Trade Levels! You can reach me – Phil Flynn – at 800-935-6487! Also make sure you are getting the Power to Prosper and me every day! Tune to the Fox Business Network!

Beware Of Oil Market Manipulation!

Energy Market Comments

by Phil Flynn, PFGBEST

1-800-935-6487

pflynn@PFGBEST.com

Wednesday, April 18, 2012 at 6:42 AM

The Energy Report for Wednesday, April 18^th 2012

By Phil Flynn 800-935-6487

The US oil market is now coming under a threat that may be the most egregious form of market manipulation ever. Yet if you think that near record participation in the market by oil speculators are the risk, then think again.

The US oil markets are coming under threat by a faltering Obama administration who is desperately trying to assign blame to the recent increase in oil prices. Their response is to demonize all speculators and to grant the Commodity Futures Trading Commission new powers and change their job from a market regulator to a market manipulator. The Obama administration wants to grant the CFTC new powers to control trading margin requirements and take away that power from the exchanges. The exchanges of course are much better suited to that task and the new power of the CFTC means that an agency that has become more political in recent years will give in to the political whims of the moment and damage the most liquid and transparent oil market in the history of the world. In a free marketplace margins are supposed to be based on volatility not as a tool to try to manipulate prices and to try to punish those whodon’t agree with your market or political bias.

This threat by the Obama administration to try to control oil prices by raising margin requirement based on prices as opposed to volatility, will severely damage the credibility of our markets. Investors will then seek more credible markets elsewhere which will reduce price transparency and ultimately lead to more dangerous market conditions. Speculators that have proved the most liquid in the history of the oil market, will leave our markets in droves seeking a fair and honest marketplace, not one that runs the risk of being influenced by the government. Hedgers will also leave our market because the price of our market will be out of sync with the actual price and that could lead to supply shortages down the road. If indeed the CFTC or the Obama administration has some better insight on what the real price for oil should be, I wish they would share it with the world so we could save a lot of time and effort. Please share with us you method of determining that price.

The President may know what the fair price of oil should be but he doesn’t’ seem to to know the difference between a market “manipulator” and a market “speculator”. The truth is that without speculators the global market price for oil would be much more volatile and dangerous. We would see oil trade in dark markets and supply streams would be more at risk to be compromised. Without speculators it would be much easier for the market to be manipulated.

If the President wants to investigate market manipulation perhaps he should start with the Federal Reserve and global central banks. They have done more to manipulate the price of oil than any speculator could ever dream of doing. Fed policy and quantitative easing have been a major factor in the meteoric oil rise. That, along with the confidence placed on the fairness of the oil market, has attracted record amounts of liquidity into this market place. The reason why so much money has flowed to the oil market is because around the world, currencies are being devalued and investors have more confidence in the fairness of the oil market than they do in the policies of many nations. They have more confidence in the oil markets than they do the debt of many nations. They also believe, as Mitt Romney said, that the policies of the Obama administration will lead to higher prices for oil in the future.

The critics of speculation argue that oil is being manipulated because we are trading substantially more oil contracts than there is oil demand in a day. The look at the flawed thought process and often quoted fact that, “the entire world produces only around 85 million actual “wet” barrels a day, this means that more than 90 percent of trading involves speculators’ exchanging “paper” barrels with one another.” In other words, hedgers have the most liquid efficient market in history. They have the most transparent market in history. They have more people that can offset their risk than ever before in history. And that’s precisely because there are more market participants and that’s because the speculators are in the market as well.

It is because we have more confidence in the oil market than we do in many other markets. For every buyer there is a seller and ever seller there is a buyer. Speculators go long and short and they assume the risk. Open interest is rising because money is seeking a return and commodities have outperformed bonds and the stock market. It is because oil is more valuable than paper money.

The President is right that wars and the threats of war are a major reason for increased oil speculation. Japan, China, and Europe have been hoarding oil and therefore speculating that they might not be able to find supply if a war breaks out and the Straights of Hormuz is blocked. Better get the oil while the getting’s good. That hoarding has been reflected in the most liquid, transparent market in history which has alerted the world to this behavior and helped us avoid a price and supply shock later down the road.

The truth is that it is dangerous proposal to allow the government into the price manipulation business. The government should not be in the business of oil price manipulation.

Make sure you are getting the Power to Prosper and me every day! Tune to the Fox Business Network! Also make sure you are getting a trial to my Daily Trade Levels! Call me – Phil Flynn – at 800-935-6487 or email me at pflynn@pfgbest.com.

BRENT CRUDE CRUNCH

Energy Market Comments

by Phil Flynn, PFGBEST

1-800-935-6487

pflynn@PFGBEST.com

Tuesday, April 17, 2012 at 7:36 AM

The Energy Report for Tuesday, April 17th 2012

By Phil Flynn 800-935-6487

The Brent crude market got hit hard as we continue to talk to Iran and an early reversal of the Seaway pipeline. In Europe the reduced odds of an attack and overflowing inventory, means that we are looking at the possibility of a glut as opposed to a shortage. Add to that the fact that oil trapped in Cushing, Oklahoma will soon find its way down to the Gulf at a beginning rate of about 100,000 barrels a day and later to the tune of 400,000 barrels a day, so we will soon see more flexibility in Europe. While Iran may be buying more time with its nuclear program, Europe can also by more time by building an alternative source of supply. That will be easier as the Seaway will start shipping oil on May 17. Reuters News reported that the reversal of the Seaway oil pipeline prompted heavy transatlantic spread trading. The Seaway pipeline owners who are Enterprise Product Partners and Enbridge, plan to advance the reversal of the flow of the pipeline by mid-May, pending regulatory approval, about two weeks ahead of schedule. The reversal would help ease the glut in U.S. crude stockpiles in the Midwest as the pipeline will bring Canadian oil and North Dakota crude directly to the U.S. Gulf Coast.

Don’t cry for me Argentina! Eva Peron would be proud as the new Argentina President has moved to nationalize part of its oil Industry. Bloomberg News reports, “Argentina Seizes Oil Producer YPF, as Repsol Gets Ousted Argentine President Cristina Fernandez de Kirchner seized control of YPF (YPF) SA, the nation’s largest crude producer, ousting Spanish owner Repsol YPF SA (YPFD) after a dispute over slumping oil output and investments. Argentina took over management of YPF with immediate effect, replacing Chief Executive Officer Sebastian Eskenazi with Planning Minister Julio De Vido, Fernandez said yesterday in a speech in Buenos Aires. The government will also send a bill to Congress to take a 51 percent stake in YPF, she said. The takeover follows more than two months of increasing government pressure on YPF after fuel imports doubled to $9.4 billion last year. The country sought to block YPF dividends and backed provincial governments when they revoked 15 oil field licenses. Fernandez also seized a $24 billion pension fund and airline Aerolineas Argentinas SA since taking office in 2007.”

Things may be tough in the global economy but not so much for OPEC. According to the Energy Information Agency OPEC profits hit a record high. Based on projections from the EIA, April, 2012 members of the Organization of the Petroleum Exporting Countries (OPEC) could earn a record $1,171 billion of net oil export revenues in 2012 and $1,133 billion in 2013. Last year, OPEC earned $1,026 billion in net oil export revenues, a 33 percent increase from 2010. Saudi Arabia earned the largest share of these earnings, $312 billion, representing 30 percent of total OPEC revenues. On a per-capita basis, OPEC net oil export earnings reached $2,684 in 2011.

Last trading day for the May future options. Get the Power to Prosper and me every day! Tune to the Fox business Network! Make sure that you call to get a trial to my Daily Trade Levels. Let us help you develop a trading plan. Call me – Phil Flynn – today to open your account and get you trial at 800-935-6487 or email me at pflynn@pfgbest.com.

What does a North Korean Rocket and the Natural Gas Market have in Common?

Energy Market Comments

by Phil Flynn, PFGBEST

1-800-935-6487

pflynn@PFGBEST.com

Friday, April 13, 2012 at 7:56 AM

The Energy Report for Friday, April 13, 2012

By Phil Flynn 800-935-6487

The Natural Gas market kind of acted like a North Korean rocket yesterday. It had an initial boost only to fail miserably a short time later. Natural gas bulls were hoping that yesterday’s gas storage number would possibly give some hope that a bottom in this market may be near. Instead it was another sign that this market is still ready to fizzle. The Energy Information Agency reported a much smaller injection into storage of only 8 bcf from the previous week, far short of the 38 to 40 plus the trade was looking for. The market then blasted off only to fail. I wonder if Kim Jong the younger is bullish gas as well. Despite the fact that this week’s injection was a bit of a disappointment, it is hard to get around the fact that working gas in storage is at a seasonal record 2,487 bcf as of Friday, April 6, 2012 and a whopping 888 Bcf higher than a year ago and 920 Bcf above the 5-year average of 1,567 bcf.

The reversal and failure to hold onto gains should be an ominous sign to bulls. If you can’t rally off of a miss like that, then you have to expect even further downside pressure.

China’s GDP number was a bit of a disappointment to some and some commodities markets seem to be viewing it in different ways. Some are falling because they fear slowing growth and demand, yet others are rallying because they believe the number gives the Chinese some incentive to stimulate the economy. China’s gross domestic product slowed to 8.1% for the first quarter of 2009. The number seemed to put a bit of hurt on the industrial metals yet grains seemed to like the possibility of more stimulus. Perhaps the Chinese will buy more food to lower prices and increase consumption. Oil prices got a bit of a hit but not as much as some might expect. The general feeling is that the number, while not exceeding the whisper number, was still in the Goldilocks range and could have been worse.

Oil of course rejected $100 a barrel this week and that is not surprising considering the fact that the Iranian situation takes center stage this weekend. If these talks bear any fruit, beware of a major correction to the downside. If they breakdown you had better get out of the way.

Make sure you are getting the Power to Prosper and me every day! Tune to the Fox Business Network! Also make sure you sign up for my Daily Trade Levels. Let us create a trading system for you! Just call me – Phil Flynn – at 800-935-06487 or email me at pflynn@pfgbest.com

Oil and Gas Glut

Energy Market Comments

by Phil Flynn, PFGBEST

1-800-935-6487

pflynn@PFGBEST.com

Thursday, April 12, 2012 at 8:03 AM

The Energy Report for Thursday, April 12^th 2012

By Phi Flynn 800-935-6487

If the International Energy Agency tells you that the market is well supplied, you had better believe it. The agency that represents 28 consuming countries always wants to error on the side having too much oil as opposed to not enough. The IEA is now saying that after more than two years of steadily tightening oil, market conditions appear to have reversed. It seems as the producers of oil got prepared for the loss of Iranian oil so they increased global oil inventories by an impressive 1.2 million barrels a day in the first quarter. That oil has been hoarded by many countries in Europe and Asia and the EIA pointed out that China put away about 700,000 barrels of oil a day into their reserve and Saudi Arabia is storing an additional 500,00 barrels per day. In fact the Saudis are asking for more customers, telling anyone who wants to listen that they have more oil for sale.

While European and Asian oil hoarding has slowed a bit, demand is more geared towards the higher grades of crude. European and Asian refiners prefer higher quality crude and because North Sea production is struggling, they are looking more to North Africa. Of course the war in the Sudan and Syria and uncertainty in Nigeria is keeping a premium on the high grades. The IEA says that Non-OPEC oil production shut down due to technical or political problems rose by 500,000 barrels a day to 1.2 million barrels a day and that the North Sea and Canada represented the largest part of the decrease.

OPEC agrees. It seems that for a change OPEC, the perceived leader of producing nations, and the IEA that rarely agree do so this time. OPEC said its production increased by about 136,000 barrels a day in March to 31.3 million barrels a day. In other words, in OPEC’s mind they are producing about 1.3 million more barrels per day than they are actually selling.

In the US, oil supply is near a 22 year high. It should be no wonder why global supply is rising. This is close to the most over supplied market that we have seen since 2008 after the crash.

Of course the oil glut is mere child’s play compared to the mother of all gluts in the natural gas market. The question is whether or not the daily injection report can save the price from total collapse. While on the Fox Business Network, listening to some other opinions on this market, I really do not believe that people are understanding the historic nature of what is happening in this market. For example, trying to look at traditional relationships between oil and gas is a waste of time. The old metrics just don’t work in the new world of fracking. With new wells producing more, we can get more gas with less drilling and at substantially less cost. Natural gas traded below $2.00 for the first time in a decade. The Wall Street Journal and AP laid out all the interesting facts. They said that the falling price of natural gas has been a boon to homes and businesses that use the fuel for heat and appliances, and for manufacturers that use it to power their factories and make chemicals, plastics and other materials. From October to March, households spent $868 on average on natural gas, a decline of 17 percent from last winter. Those savings have helped to relieve the burden of rising gasoline prices. Households spent $1,940 on gasoline from October to March, a 7 percent increase from the same period a year ago.

There is so much natural gas being produced – and is still in the ground – that drillers, policymakers, economists and natural gas customers are trying to figure out what to do with it. Traders are too. Fun facts on nat gas! All-time low: $1.32 , Jan. 13, 1995. All-time high: $15.30, Dec. 5, 2005. The 10-year average: $5.96/Average price in Asia: $15.90 /Average price in Europe: $9.37.

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Summer Fuels Make Me Feel Fine

Energy Market Comments

by Phil Flynn, PFGBEST

1-800-935-6487

pflynn@PFGBEST.com
Wednesday, April 11, 2012 at 7:44 AM

The Energy Report

The Energy Information Agency came out with its much anticipated never duplicated Summer Fuels Outlook and it was a market mover. Well not perhaps for the summer fuels so much, but what we really consider a winter fuel, the natural gas market. Of course if prices continue to fall it won’t just be winter any more.
The EIA dramatically lowered their second-quarter average Henry Hub spot price prediction by 28.9% to $2.20 per million BTU’s. That is down from last month’s $3.10 prediction. With the possibility of a dramatic price drop like that, one might expect that this could lower production expatiations as well. Well don’t bet on it! The shale gas revolution continues to rewrite the rules as we head towards an unprecedented glut of supply. The EIA instead raised its second-quarter production forecast 2.5%, to 65.86 billion cubic feet per day from last month’s estimate of 64.23 BCF and they are also raising their average daily production rate to 65.77 BCF which is a 1.9% increase from their last projection of 64.52 BCF.
Which continues to raise the question I have asked before, where are we going to put it? It seems we are headed for full storage and unless we see an incredible uptick in demand due to a scorching hot summer, we are going to see a crisis in this market. With no storage available the most likely outlook is for a major price collapse to force a production decline. That may l not happen at $2.00 but it may happen at $1.00.
The EIA also said that they expect electricity generation from coal to decline by about 10 percent in 2012 as generation from natural gas increases by about 17 percent. EIA forecasts that electricity generation from coal will increase by about 7 percent and generation from natural gas to fall by 3 percent in 2013 as projected coal prices to the power sector fall slightly while natural gas prices increase, allowing coal to regain some of its power sector generation share. Still not enough to change the wildly bearish natural gas outlook.
The traditional summer fuel blend that we use to think of was gasoline yet the EIA says they expect that demand in the US will continue to be weak. The EIA says that it expects that regular-grade gasoline retail prices, which averaged $3.71 per gallon last summer, will average $3.95 per gallon during the current summer (April through September) driving season, a year-over year increase of 6.3 percent. The projected monthly average regular retail gasoline price peaks this summer at $4.01 per gallon in May. Diesel fuel prices, which averaged $3.94 per gallon last summer, are projected to average $4.21 per gallon this summer, with monthly prices peaking at $4.25 per gallon in the middle of the driving season. Daily and weekly national average prices can differ significantly from monthly and seasonal averages, and there are also significant differences across regions, with monthly average prices in some areas exceeding the national average price by 25 cents per gallon or more.
The high price is killing demand as well as the changing US demand patterns and we are demanding more fuel efficiency. MasterCard Spending Pulse reported that US gasoline demand was down on the week and has fallen 2.4% year over year. They said that gas demand fell 68,000 bpd or 0.8% to 8.799 million bpd during the week-ended April 6, marking a decrease of 2.4% versus the comparable year-ago period, according to data.
The API added to the Fun reporting a whopper of a crude build to the tune of 6.6 million barrels. Hey, I told you that oil would eventually show up in the Gulf Coast. The API reported a crude build of 6.6 million barrels. For gasoline we saw an increase of 1.2 million barrels and for distillates a drop of 476,000 barrels.
A major earthquake near Indonesia at this point does not seem to be moving the market. Stay tuned!
Make sure you are getting the Power to Prosper and me every day! Tune to the Fox Business Network! Also make sure that you are getting my Daily Trade Levels! Just call me – Phil Flynn – at 800-935-6487 or email me at pflynn@pfgbest.com
There is a substantial risk of loss in trading futures and options.Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. PFGBEST, its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

Energy Market Comments

by Phil Flynn, PFGBEST

1-800-935-6487

pflynn@PFGBEST.com
Tuesday, April 10, 2012 at 8:04 AM

The Energy Report
Trying To Top

Once again it seems like the Easter holiday could turn out to be a turning point for the global oil market. Oil prices continue to work lower in the aftermath of disappointing Chinese trade data as well as renewed hopes that perhaps the world can avoid a major conflict with Iran. Also the market anticipates another increase in US crude supply and anxiously awaits the return of refineries coming back from maintenance.
China shocked the market with a surprise trade surplus of $5.35 billion in March. China, the exporting machine, may be showing signs of a domestic slowdown being hit by the slowing Europe as well as rising energy costs. At the same time it seems that China’s domestic consumption is raising concerns once again of a potential hard landing in the land of the dragon.
Of course the other issue is Iran. Is there hope that we can avoid a war? The AP reports that, “Iran is signaling a possible compromise offer as it heads into crucial talks with world powers deeply suspicious of its nuclear program: offering to scale back uranium enrichment but not abandon the ability to make nuclear fuel. The proposal — floated by the country’s nuclear chief as part of the early parrying in various capitals before negotiations get under way Friday — suggested that sanctions-battered Iran is ready to bargain. But this gambit, at least, appeared to fall short of Western demands that Iran hand over its most potent nuclear material and ease a standoff that has rattled nerves and spooked markets with seesaw oil prices and threats of Israeli military strikes. The talks involving Iran and the five permanent United Nations Security Council nations plus Germany, to be held in Istanbul, are the first direct negotiations on Tehran’s nuclear program since a swift collapse more than 14 months ago. Despite far-reaching complexities, the dispute effectively boils down to one issue: Iran’s stated refusal to close down its uranium enrichment labs.” In other words, don’t count on it.
Reuters News is reporting that Japanese trading houses are reducing Iranian crude imports from April, industry sources said on Tuesday, joining the country’s refiners in deepening cuts even after the United States said Japan had done enough to support sanctions against Iran. The U.S. and the European Union have tightened measures aimed at reducing Iran’s oil trade, stemming the flow of petrodollars to Tehran and forcing the Islamic Republic to halt a nuclear program the West suspects is intended to produce weapons. Between them, Japan’s trading houses and refiners will reduce Iranian crude imports by about 60,000 barrels per day (bpd) in April, industry sources said. The reduction is the equivalent to about 18.5 percent of the 322,900 bpd that Japan imported in the first two months of the year, according to the latest government data available. Some of Japan’s trading companies, like some of its refiners, let annual import contracts with Iran lapse at the end of March, industry sources said.”
Make sure you are getting the Power to Prosper by tuning into the Fox Business Network! Also open you account with me today and let me help you navigate these markets. Just call me at 800-935-6487 or email me at pflynn@pfgbest.com
There is a substantial risk of loss in trading futures and options.Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. PFGBEST, its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

Forever And A Day

Energy Market Comments

by Phil Flynn, PFGBEST

1-800-935-6487

pflynn@PFGBEST.com

Monday, April 09, 2012 at 7:51 AM

The Energy Report

By Phil Flynn 800-935-6487

It seems like so much has changed since the holiday but yet at the same time, everything kind of remains the same. For oil the market, it not only has to deal with the aftershocks of a weaker than expected jobs report but also the hope that new talks with Iran could erase the $20 or so Iranian war premium. Friday’s jobs data seemed to suggest that Ben Bernanke was right to be worried as U.S. payrolls grew by only 120,000 in March which was below the expected gain of 203,000 jobs for the smallest rise since October.

For China inflation data is raising more questions about just what is going on in the Chinese economy. China’s consumer price index rose 3.6% in March, year over year heating up from a 3.2% increase from the February reading and coming in hotter than expected 3.3%.

Is it too hot or not too cold but just right? Surging Chinese inflation may reduce the odds of a China quantitative ease yet it was just last week we were more worried about China slowing. Is it possible that China inflation is surging as growth is faltering? The hotter than expected inflation data would seem to give more credence to the official manufacturing data that China released. Either that or China is entering a form of stagflation that would present a new host of issues for China and the global economy at large.

Gold seems to be getting a boost on the China data but that may be a reflection of the fact that India gold dealers have ended their strike on buying gold because of an Indian import tariff.

For crude oil a weak jobs number may not be all that bearish. If oil becomes convinced that this weakness in jobs will once again heat up talk of QE2, then things could really get going. If not then it is bearish as the US economy continues to struggle.

Yet can we possibly see a reduction of the Iranian war premium? The AP reports that, “Iran’s nuclear chief signaled Tehran’s envoys may bring a compromise offer to the talks this week with world powers: Promising to eventually stop producing its most highly enriched uranium, while not totally abandoning its ability to make nuclear fuel. The proposal outlined late Sunday seeks to directly address one of the potential main issues in the talks scheduled to begin Friday between Iran and the five permanent Security Council members plus Germany. The U.S. and others have raised serious concerns about Iran’s production and stockpile of uranium enriched to 20 percent, which could be turned into weapons-grade strength in a matter of months. But the proposal described by Iran’s nuclear chief, Fereidoun Abbasi, may not go far enough to satisfy the West because it would leave the higher enriched uranium still in Tehran’s hands rather than transferred outside the country.”

“Abbasi said Tehran could stop its production of 20 percent enriched uranium needed for a research reactor, and continue enriching uranium to lower levels for power generation. This could take place once Iran has stockpiled enough of the 20 percent enriched uranium, Abbasi told state TV. The 20 percent enriched material can be used for medical research and treatments. The enrichment issue lies at the core of the dispute between Iran and the West, which fears Tehran is seeking an atomic weapon — a charge the country denies, insisting its uranium program is for peaceful purposes only. Uranium has to be enriched to more than 90 percent to be used for a nuclear weapon, but with Iran enriching uranium to 20 percent levels, there are concerns it has come a step closer to nuclear weapons capability. Abbasi said production of uranium enriched up to 20 percent is not part of the nation’s long-term program — beyond amounts needed for its research reactor in Tehran — and insisted that Iran “doesn’t need” to enrich beyond the 20 percent levels.”

MarketWatch reports that, “Iran has stopped shipping oil to Greece and may halt supplies to Royal Dutch Shell PLC over unpaid bills as the impact of sanctions widens.” The news suggests a decline in Iranian oil exports last month may accelerate as banking sanctions add to an upcoming European ban on Tehran oil. That could lead to upward pressure on oil prices, which have recently surged to a four-year high. The Mehr news agency said that, “due to unpaid bills, Iran stopped deliveries to Greek refiners Hellenic Petroleum and Motor Oil. Greece has long been the European Union country relying the most on Iranian oil–sometimes for as much as a third of its supplies. What we are seeing is an uneven recovery. It is going to lead top some choppy and large moves.

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Don’t Count Your Easter Eggs

Energy Market Comments

by Phil Flynn, PFGBEST

1-800-935-6487

pflynn@PFGBEST.com

Thursday, April 05, 2012 at 8:06 AM

The Energy Report

By Phil Flynn 800-935-6487

Don’t count your Easter eggs before they are hatched and do not count your barrels of oil until they come into port. A supply side surge in oil and a seemingly faltering Eurozone sent oil prices crashing back down to earth. The Energy Information Administration sent oil on a big ride by reporting that U.S. commercial crude oil inventories increased by 9.0 million barrels from the previous week. At 362.4 million barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year. The build came after a surge of delayed imports. The EIA reported that U.S. crude oil imports averaged nearly 9.8 million barrels per day last week, up by 505 thousand barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged about 9.0 million barrels per day, 59 thousand barrels per day above the same four-week period last year. We saw a supply surge into the Gulf Coast as all of the crude that was lost in the fog showed up all at once. We also saw supply increase into Cushing, Oklahoma.

In an excellent article the EIA says that, “Crude oil inventories at the Cushing, Oklahoma storage hub, the delivery point for the NYMEX light-sweet crude oil futures contract, have risen by 12.0 million barrels (43%) between January 13, 2012 and March 30, 2012. This was the largest increase in inventories over an 11-week period since 2009. The inventory builds can be partly attributed to the emptying of the Seaway Pipeline, which ran from the Houston area to Cushing, in advance of its reversal. While Cushing inventories are now approaching the record levels of 2011, the amount of available storage capacity at Cushing is much greater now than it was a year ago, relieving some of the pressure on demand for incremental storage capacity.

Historically, the Seaway Pipeline delivered crude oil from the U.S. Gulf Coast to Cushing, where it then moved to the refineries connected by pipeline to the storage hub. In November 2011, Enbridge Inc. acquired a 50% share in the pipeline from ConocoPhillips; at this time, Enbridge and joint owner Enterprise Product Partners announced they would reverse the direction of the pipeline to flow from Cushing to the Gulf Coast. Currently, the pipeline is expected to deliver 150,000 barrels per day (bbl/d) from Cushing to the Gulf Coast beginning in June 2012. The companies plan to expand Seaway’s capacity to 400,000 bbl/d in 2013 and to 850,000 bbl/d in 2014.”

“In early March, approximately 2.2 million barrels from the Seaway pipeline was emptied into Cushing storage in order to prepare for the pipeline’s reversal. This accounts for about 20% of the build in inventories during this period. However, even without the emptying of Seaway, inventory builds over the past months have been particularly steep compared to the five-year average. As of January 13, Cushing inventories stood at 28.3 million barrels, slightly below their seasonal five-year average. After the 12.0-million-barrel increase, inventories were almost 11 million barrels above their average level, the largest such variation to average since June 2011. This is largely due to flows into Cushing as a result of increasing production in the mid-continent region.”

If you thought the euro crisis was solved with the Greek bailout then you were counting your Easter Eggs before they were hatched. Of course oil will focus on demand and the fear it may slow. The euro-zone looks like it is headed back into a crisis. Weaker than expected data and concerns about Spain. A weak Spanish bond auction is raising fears that Spain is on a path to economic crisis bringing the EU and the world down with it. Here we go again.

Have A Happy Easter! Make sure you are getting the Power to Prosper and me every day! Tune to the Fox Business Network! Also make sure you get your hedges on and get a free trial to my Daily Trade Levels! Call me – Phil Flynn – at 800-935-6487 or email me at pflynn@pfgbest.com.

Irrational QE3 Expectations.

Energy Market Comments

by Phil Flynn, PFGBEST

1-800-935-6487

pflynn@PFGBEST.com

Wednesday, April 04, 2012 at 6:05 AM

The Energy Report Wednesday April 4, 2012

Fed Chief once again played traders like a fiddle. When the Fed fund Futures started raising expectations that rates would increase in 2013 it seemed Ben was a bit perturbed. He soon sent a message that the data was not as good as it seems and bond vigilante’s better beware. The Fed was ready and willing to employ QE 3 and that seemed to be the message the fed wanted to send or at the very least he wanted traders to stop messing with the short end of the yield curve.

Of course after yesterdays Fed Minutes we know realize that Ben Bernanke was really just trying to slow the speculative fervor. No, QE3d is not right around the corner but don’t try to force his hand by raising rate increase expectations until Ben feels ready. It’s his party and he will print if he wants to so the message to traders is that do not try to force his hand. He wants to be the leader and the traders had better follow.

Darn Those Speculators! No I am not talking about traders. I am talking about those counties in Europe and Asia that continue hoard supply ahead of what they “Speculate” will be a disruption of supply. Hoarding in Europe and North Sea problems drove the Brent/ WTI spread to a 6 month high. The Latest evidence of European Oil hoarding comes from the French as reported by Bloomberg News. It seems that BP Plc, Europe’s second-biggest oil company, increased purchases of diesel for delivery into France more than 10-fold last month before the country raises the amount it requires companies to hold in its Strategic Reserves.

Dow Jones Reported that we have seen the fastest expansion in oil cargoes since 2004 is exceeding demand and filling up storage tanks from Egypt to Japan, creating a glut that threatens to reverse the biggest gain in shipping rates in five years. According to Dow Jones tankers will be carrying 488.8 million barrels by April 14, 3.9 percent more than the week earlier, estimates Oil Movements, which has tracked cargoes for 25 years. Rates for very large crude carriers, each holding 2 million barrels, will drop 58 percent to average $19,750 a day, the median of six analt forecasts compiled by Bloomberg shows. Shares of Hamilton, Bermuda-based Frontline Ltd. (FRO), the largest operator, will fall 46 percent in 12 months, the average of 19 predictions shows.
Shipments accelerated as buyers sought to expand reserves on mounting concern that Middle East supply will be disrupted by conflict over Iran’s nuclear program. Shipments accelerated as buyers sought to expand reserves on mounting concern that Middle East supply will be disrupted by conflict over Iran’s nuclear program. Rising stockpiles are coming at a time of slowing growth in China and a contraction in Europe, which together account for about 33 percent of demand. The global market is getting as much as 2 million barrels a day more than it needs, Saudi Arabian Oil Minister Ali al-Naimi said March 20.

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Slip Sliding Away!

Energy Market Comments

by Phil Flynn, PFGBEST

1-800-935-6487

pflynn@PFGBEST.com

Monday, April 02, 2012 at 8:09 AM

The Energy Report for Monday, April 2, 2012

By Phil Flynn 800-935-6487

Oil prices failed to get a boost on the better than expected official Chinese PMI data, perhaps because the data in Europe was bit mixed. In China the official Purchasing Manager Index from the government came in at 53.1 in March, up from 51 from February. The March reading in the official report was the fourth consecutive monthly increase and totally different than the HSBC’s China PMI number which came in at print of 48.3. The HSBC’S reading has raised questions about whether or not China is headed for a hard landing or is able to keep a steady flight. The HSBC number has been below 50 for five months in a row and headed in a different direction than the official government data.

In the UK it seems that while the manufacturing sector is growing, hitting a 10 month high, the PMI for the manufacturing sector rose to 52.1 in March. Yet inflation pressures may hurt manufacturers as soaring oil prices seem to be squeezing UK manufacturers.

In the meantime it seems the oil market lost some of its bullish momentum. Dow Jones reported, “The Commodity Futures Trading Commission reported Friday that the number of speculators betting U.S. crude futures would rise fell by nearly 3% last week. Later in the day Intercontinental Exchange Inc. (ICE) will release similar data from the European benchmark. “Recently, net long positions in Brent were just short of the highest level they had achieved since records began in June 2011, meaning there is also potential for correction here – the latest drop in prices at least would suggest this.”

Iraq is accusing the Kurds of selling oil through Iran. This should be interesting to watch. Iraq’s oil production is soaring. The AP reported that, “Iraq’s northern Kurdish semiautonomous region has halted oil exports over a payment row with the central government in Baghdad, causing further deterioration in its relationship with the country’s Arab-led government. The Kurdistan Regional Government has unilaterally struck scores of deals with oil companies in recent years, even though Baghdad says it has no right to do so.” The two sides struck a tentative deal in 2011 by which the Kurds will send the oil to Baghdad, which sells it, and each side then takes 50 percent of the revenues.

In a statement issued late Sunday, the region’s Ministry of Natural Resources said Baghdad failed to send any money since May, even though it had been exporting 50,000 barrels per day. They said only two payments of $514 million have been made with the last made in May 2011. “After consultation with the producing companies, the Ministry has reluctantly decided to halt exports until further notice,” the statement said. “There have been no payments for 10 months, nor any indication from federal authorities that payments are forthcoming.” It added that oil exports will be resumed once payment issue is resolved, adding that the production will be diverted to the local market for processing and refining to generate an alternate source of cash flow for the producing companies. Last week, Iraq’s Finance Minister Rafia al-Issawi said Baghdad already approved payment of $560 million to oil producers in the Kurdish region but it was awaiting final audits.”

Brent Crude may worry a bit about maintenance. Dow Jones reports that Royal Dutch Shell PLC (RDSA) will start planned maintenance work on its Shearwater platform in the North Sea in the near future, a company spokesman told Dow Jones Newswires Monday. The company initially brought the maintenance work forward last week after a serious gas leak at Total SA’s (TOT) nearby Elgin field forced it to partially evacuate staff and suspend operations at Shearwater and the neighboring Noble Hans Deul drilling rig. “The maintenance has not begun yet…we are taking precautionary measures to ensure the safety of our staff,” the spokesman said. Shearwater produces around 50,000 barrels of oil equivalent a day.

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Faulty Oil

Energy Market Comments

by Phil Flynn, PFGBEST

1-800-935-6487

pflynn@PFGBEST.com

Friday, March 30, 2012 at 7:57 AM

The Energy Report

By Phil Flynn 800-935-6487

It seems the market is faltering a bit as uncertainty reigns supreme. Yet the Supreme Leaders of Iran seemed to want to fan the flames of the bazaar bringing back an oil market that was overdone. The International Energy Agency and comments from Saudi Arabia weighed on prices. The IEA says that they stand ready to release supply if market conditions warrant, the market sold off on the comments but let’s face it, at this time market conditions do not warrant it.

Reuters News reported that oil consuming nations may seek reassurance from Saudi Arabia that it will not cut oil production and neutralize the impact on oil prices if consumer countries release emergency reserves, diplomats and industry sources said. The issue may be raised by a U.S. delegation, led by U.S. Secretary of State Hillary Clinton, which is in Riyadh this weekend to discuss Syria with Gulf States. Clinton will see Saudi King Abdullah and Foreign Minister Saud al-Faisal. “If they’re going to release reserves they need an assurance from the Saudis that they won’t offset it by cutting supply,” said one industry source familiar with thinking in Washington. “There’s no doubt the measure needs the cooperation of Saudi Arabia,” said a diplomat. The United States, with Britain and France, is considering a release from emergency stockpiles to cut fuel costs. Other countries including South Korea and Japan may join the plan. Riyadh would not want deliberately to undermine an effort to bring down oil prices. But it might reduce supplies in response to a release of oil drawn from reserves if that were to displace Saudi supplies, particularly in the United States where the national Strategic Petroleum Reserve would provide the bulk of any drawdown.

Oil prices have risen sharply since the start of the year, at one point breaking $128 a barrel, largely because of sanctions against oil producer Iran, aimed at slowing Tehran’s nuclear program. Diplomats have said the sanctions aim to meet Israeli demands for action against Tehran by hitting Iran’s oil earnings and to prevent the alternative – a military strike by Israel. “The view is that higher oil prices are a price worth paying to prevent or push back a war against Iran and higher oil prices can be alleviated by using emergency stocks,” said the industry source.

Saudi Oil Minister Ali al-Naimi has said publicly that Riyadh wants to bring down oil prices. But he has also said that Saudi can do no more than meet demand for its crude, which it is already doing, and that the previous drawdown of oil reserves last June during the Libyan civil war did not work. “That’s up to them,” he said to reporters in Doha last week of a possible consumer country release. “What I can tell you is that they have done it before and it didn’t do anything. You saw what happened in the last release? Nothing.”

The concern among Western diplomats is that oil from strategic stocks could displace Saudi barrels, particularly to the United States where Saudi imports have risen recently, leaving net supplies globally little changed.

Last year after the International Energy Agency tapped reserves at the end of June to fill the gap left by Libya’s civil war, Saudi output at first remained high, and then fell.

Reuters estimates put Saudi production at 9.85-9.9 million barrels per day from July to September before falling to just over 9.4 million bpd in October and November. It has since risen steadily back to about 9.9 million bpd now.

When we talk about war premium in oil we are usually talking about Iran and Syria these days. Perhaps we should be talking about the Sudan. Dow Jones Reports that, “fighting between the armies of South Sudan and Sudan intensified in the oil regions along a poorly-defined border, in the latest escalation of conflict between the two nations, officials told Dow Jones Newswires Tuesday. South Sudan army spokesman Philip Aguer said South Sudanese troops were pursuing Sudanese troops inside Sudan after capturing two army bases in the restive region of South Kordofan. “They [Sudan] attacked our positions first and we repulsed them. We are still pursuing them as a self-defense measure.” Sudan’s state media reported late Monday that President Omar al-Bashir had suspended a summit meeting with his South Sudanese counterpart, accusing South Sudan’s forces of attacking its oil fields. Fighting erupted Monday after Sudanese planes bombed South Sudan’s oil regions of Jua and Pan Akuach. Relations deteriorated after South Sudan halted shipments of 350,000 barrels a day through Sudanese pipelines and ports in January, accusing its northern neighbor of stealing $815 million of its transit oil.

Make sure you are getting the Power to Prosper and me every day! Tune to the Fox Business Network! Also make sure you get a subscription to my Daily Trade Levels. Just call me – Phil Flynn – at 800-935-6487 or email me at pflynn@pfgbest.com.

Where Gas Prices May be Hurting the Economy

Energy Market Comments

by Phil Flynn, PFGBEST

1-800-935-6487

pflynn@PFGBEST.com

Thursday, March 29, 2012 at 6:18 AM

The Energy Report for Thursday, March 29, 2012

By Phil Flynn 800-935-6487

There has been a lot of talk about a New York Times piece that seems to suggest that at least so far, record high gas prices have not hurt the economy. Perhaps not here but that may not be true in Europe as weak UK data helped send global oil markets tumbling. And oh yes, we had that story that the French may be joining the US and the UK in releasing oil from their strategic reserve and a build in oil inventory and we will get to those, but let’s first focus on Europe.

Gas prices in the UK are approaching $10.00 a gallon. Britain’s economy shrank a revised 0.3 percent in the final three months of 2011, worse than the 0.2 percent drop previously estimated. In Europe prices for oil are at record highs. According to some fine work from the Energy information Agency it seems that on a euro basis, the spot price for Brent crude oil, a global benchmark, has surpassed its prior record high and set a new record high of 96.53 euros per barrel on March 13, 2012, as the currency exchange rate has declined. The prior record of 92.76 euros per barrel was set on July 3, 2008. However, on a U.S. dollar basis, the spot price for Brent crude oil remains under the prior record high of $145.66 per barrel, which was set on July 3, 2008. On March 13, 2012, the Brent crude oil spot price was $126.30 per barrel.

From January 3, 2012 to March 26, 2012, the spot price for Brent crude oil in euros rose from 85.66 euros per barrel to 94.61 euros per barrel, or 10.4%. During the same period, the spot price for Brent crude oil in U.S. dollars increased from $111.79 per barrel to $126.39 per barrel, or 13.1%. Several factors underpin the increase in global crude oil benchmarks since the start of the year.

Although the price of crude oil increased by more than 10% since the beginning of the year, the retail prices of petroleum products in Europe rose only about 4% to 7% because of the inclusion of duties and taxes, which are typically a much more significant share of the retail pump price of motor fuels in Europe than in the United States. From January 9, 2012 to March 19, 2012, the European Union-weighted retail gasoline price rose from 1.55 euros per liter to 1.65 euros per liter, or 6.5%, according to data from the European Commission Oil Bulletin. During the same period, the European Union-weighted retail diesel price rose from 1.46 euros per liter to 1.53 euros per liter, or 4.3%.

Will France be complicit in a plan to join the US and the UK in a seemingly politically inspired move to release oil from our global oil reserves? The AP reported that France’s government says it is considering releasing oil from its strategic reserves as part of a U.S.-led effort to increase supply to bring down high prices. Industry Minister Eric Besson said, “the United States asked, and France welcomed this hypothesis.” Government spokeswoman Valerie Pecresse said France is waiting for recommendations from the International Energy Agency before tapping its oil reserves. She said the French government is also pressing oil-producing countries to release more oil on the markets to ease prices. The AP says that like in the United States, high gasoline prices have been an issue in the campaign for France’s presidential elections. Hmmm.

Our ship has finally come in! In the Gulf Coast last week! Oil that has been fog delayed and has wrecked havoc with the oil data for the last 3 weeks might be getting caught up with reality. The EIA reported million barrels per day. U.S. crude oil imports averaged about 9.3 million barrels per day last week, up by 1.0 million barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged 8.7 million barrels per day, 44 thousand barrels per day below the same four-week period last year. This led to a build in crude supply of a whopping 7.1 million barrels from the previous week. At 353.4 million barrels, U.S. crude oil inventories are in the upper limit of the average range for this time of year. Total motor gasoline inventories decreased by 3.5 million barrels last week and are in the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories decreased by 0.7 million barrels last week and are in the middle of the average range for this time of year.

Make sure you are getting the power to Prosper and see me every day! Tune to the Fox Business Network! Also make sure that you are getting a trial to my Daily Trade Levels. Just call me – Phil Flynn – at 800-935-6487 or email me at pflynn@pfgbest.com to get your trial and to open your account.

Once in a Decade

Energy Market Comments

by Phil Flynn, PFGBEST

1-800-935-6487

pflynn@PFGBEST.com

Wednesday, March 28, 2012 at 8:16 AM

The Energy Report for Wednesday, March 28, 2012

By Phil Flynn 800-935-6487

Natural gas hit a decade low and shows us once again the cyclical nature of commodities. Back in 2002, the last time natural gas was this low, the market was still trying to come to grips with the post 9-11 slowdown. Yet behind the scenes there was increasing worries about natural gas which for years we had taken stable natural gas prices for granted. There was a movement towards cleaner burning natural gas and a surge in electricity demand as it seemed everyone in the country was leaving those computers plugged in. Natural gas was the best alternative for electricity generation as coal was too dirty and nuclear power was a dirty word.

Yet there was trouble in paradise. While natural gas demand was surging, our supply was falling. Wells were depleting faster than expected and many parts of the country were off limits for drilling. The market had to come to grips with the fact that we had hit “peak natural gas production”.

This became such an issue that the Federal Reserve Chairman warned that this was perhaps one of the biggest threats to our long term economic health. Even our friends over the border in Canada, our largest foreign provider of natural gas, told us that if supplies became tight enough they would meet their own needs before meeting ours. That sent natural gas on an incredible ride. A market that was generally thought to be a 2 dollar commodity in the 1990s went crazy. We saw wild rallies and incredible volatility as the market had to come to grips with the potential of “peak natural gas”.

The piece de resistance of course came when natural gas prices hit an all time high of $15.78 in 2005, just a few short years later. It looked like natural gas might never stop going higher! We needed to build import terminals to get liquefied natural gas from Trinidad or somewhere else out there. We had Iran, Russia and Qatar awash in natural gas talking about setting up a cartel to influence the price of a geographically tight commodity.

Of course behind the scenes high prices were curing high prices. The fracking revolution was getting under way. Now instead of worrying about running out of natural gas we have to worry about where the heck we are going to put it all.

Natural gas has a glut of epic proportions and we are running in danger of a total price collapse for this commodity. In the near term there is almost nothing at all bullish that we can possibly see for this commodity. Consider the fact that after a warm winter and record US production, our supplies are overflowing. According to the Energy Information Agency, working gas in storage was 2,380 billion cubic feet as of Friday, March 16, 2012 which put them a whopping 54% above the five year average. In other words, storage is already half full before the refill season has begun.

On top of that, if you look at rig counts they do not seem to indicate that production will drop significantly anytime soon. Reuter’s News reported that the number of rigs drilling for natural gas in the United States fell by 11 this week to 652, data from oil services firm Baker Hughes showed last Friday. Horizontal rigs — the type most often used to extract oil or gas from shale — fell by 6 to 1,174. Not enough to make a big difference in the oversupply. Add to that we expect that many nuclear power plants will soon be coming back on line after maintenance.

Natural gas traders also seem to be ready for a collapse. According to the Wall Street Journal hedge funds are placing bets that will pay off if prices fall further. They are buying put options.

Last week the number of open positions in July put options that pay out if natural gas falls to $2 or lower has risen more than 700% since January, according to exchange data. In other words, despite the passivity of more production cuts we could be getting ready for an epic collapse. A far cry from the mood we say just a few years ago. From bust to boom to bust again.

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I Fought the Fed REDUX

Energy Market Comments

by Phil Flynn, PFGBEST

1-800-935-6487

pflynn@PFGBEST.com

Tuesday, March 27, 2012 at 8:03 AM

The Energy Report

By Phil Flynn 800-935-6487

Here comes Ben with that big gun, I fought the Fed and the … Fed won. I fought the Fed and the Fed and Won. They needed money so they printed some, I fought the Fed and The Fed won, I fought and the Fed and the Fed won. I thought the data was a launching pad, thought the race was won. Well Ben says the jobs market is bad, I fought the Fed and the Fed won. I fought the Fed and the Fed won. Rates will stay down until the Fed is done, I Fought the Fed and the Fed Won. I fought the Fed and the Fed Won.

Don’t fight the Fed and don’t fight Ben Bernanke. When he says rates are going to stay low until 2014 or 2015, you had better believe him. The Fed Chairman sent global commodity markets and stock markets soaring as he warned Fed fund futures traders and any other bond vigilante that wanted to listen, don’t get ahead of yourself. Instead of celebrating a slew of better than expected jobs reports, Ben seems to suggest that it is really smoke and mirrors. Oh sure, Ben said he was surprised at the data but he warned that it really does not seem to jive with the pace of the economic expansion. He seems to suggest that job growth is not normal and to see what he thinks is solid jobs growth then we will need to see much stronger economic growth.

So how does the Fed promote economic growth? Well folks it is easy! Easy money that is. Those that thought a QE 3d was off the table better get ready to put it back on. The printing presses are ready and waiting and full of ink.

That brought the risk trade back on as precious metals and grains and copper that enjoyed a nice ride yet oil was subdued with hopes that we can still avoid a conflict with Iran. An AP report had traders readjusting their risk premium as it appears there is still a small chance that the world can negotiate our way out of the mess that Iran has put us in. The AP reported that Ira and six world powers have agreed to meet

April 13 for a new try at finding common ground on Tehran’s nuclear program. The United States, Britain, France, Germany, Russia and China are involved in the talks which are down to negotiating where the talks are going to take place. So in other words, an attack on Iran’s nuclear faculties should not happen before April 13 anyway.

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All Dressed Up

Energy Market Comments

by Phil Flynn, PFGBEST

1-800-935-6487

pflynn@PFGBEST.com

Monday, March 26, 2012 at 8:12 AM

The Energy Report

By Phil Flynn 800-935-6487

The oil market is all dressed up but has nowhere to go. Oil, that has a huge Iranian/Syria/ or country of your choice war premium built in, seems that until something happens will insist in trading in a range! Crude is giving back some of Friday’s gains and seems to act like it has a destination but with nowhere to go.

Mario Monte is warning that Spain could be the next phase of the European debt crisis. The Trilby Lundberg says that it is possible that gas is topping out at the pump and I agree, assuming that is that there is no war. Natural gas continues to flounder in a sea of fracking supply. Yet in Poland it seems that fracking is not going as well. Hard rock and low returns seem to suggest that Poland is going to be left out of the fracking boom.

The AP is reporting, ”Diplomats say Iran and six world powers have agreed to meet April 13 for a new try at finding common ground on Tehran’s nuclear program .But they tell The Associated Press that sensibilities generated by failed previous rounds and disputes on what should be discussed are keeping them from finding a venue. They say the United States, Britain, France, Germany, Russia and China oppose Iran’s choice of Istanbul because the last round of talks there 14 months ago ended in failure. They say Iran, in turn, rejects Vienna because it is home to the International Atomic Energy Agency, which is trying to probe allegations Tehran secretly worked on nuclear weapons. The diplomats said Monday other venues are still being discussed and the start of the talks is not in jeopardy.
They demanded anonymity because their information is confidential.”

According to the Lundberg Survey the average price for regular gasoline at rose 11.49 cents to $3.929 a gallon over the last 2 weeks. Lundberg told Bloomberg that refinery glitches caused some wholesale markets to jump. Also Lundberg points out we went to daylight savings that adds another hour for gas demand.

Can we see the Gulf Coast make a comeback? Foggy days and foggy nights have slowed gulf imports! We should see a bit of a rebound. Look for crude to be up 3.5 million barrels this week. Look for gas to be down 2.1 million barrels and distillates up 1 million barrels. Refinery runs should drop 0.5.

Make sure you are getting the Power to Prosper! Tune to the Fox Business Network whee you can se me every day! Make sure you are trading with a plan! Call me for a free trial to my Daily Trade Levels. Just call me – Phil Flynn – at 800-935-6487 for a trial and to open your account.

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