On the price of Crude Oil, the sharp drop in Brent Crude has led the front-month contract to break below the recent narrowing range around 111. This is giving us no indication of a new direction of the contract. There is no in the market catalyst to guide Crude Oil prices to either direction. But, the serious decline in Brent Crude Oil price has narrowed the WTI-Brent spread to the level not seen for a month.

The DOE/EIA’s report suggests that Crude Oil production in the US will rise sharply over the next 10 yrs driven by “continuing improvement of advanced Crude Oil production technologies.

Annual output growth would reach 7.5-M bpd in Y 2019, averaging 234-K bpd, before peaking in Y 2020 and reducing to 6.1-M bpd in Y 2040. Total tight/shale oil supply will increase to 2.8-M bpd, or 38% of total Oil supply. Despite the upward revision in domestic production, estimates from the DOE/EIA remained below those of WoodMac which forecast US tight/shale supply will be 4.6-M bpd by Y 2020, 65% higher than DOE/EIA’s estimates.

Nat Gas inventory slipped a bit last week. The DOE/EIA reported that Nat Gas storage dropped -73 bcf to 3 804 bcf in the week ended 30 November. Stocks were +33 bcf higher than the same period last year and +168 bcf above the 5-yr average of 3 636 bcf.

Baker Hughes NYSE:BHI reported that the number of Nat Gas rigs fell -7 units to 417 in the week ended 6 December. Oil rigs decreased -4 unit to 1 382 and Miscellaneous rigs stayed unchanged at 1 unit and the total number of rigs fell -11 units to 1 800. Directionally oriented combined Oil, Nat Gas, and Miscellaneous rigs dropped -2 units to 191 units while horizontal rigs slid -7 units to 1 103 and vertical rigs slid -2 units to 506 during the week.

The DOE/EIA reported that the use of Nat Gas in the industrial and electric power sectors is expected to rise in the coming decade due to relatively low Nat Gas prices. Nat Gas use in the industrial sector is expected to rise +16% to 7.8 trillion cubic feet/year in Y 2025, up from 6.8 trillion cubic feet/year in Y 2011. But, Nat Gas use by power plants does not increase as sharply as generation due to the efficiency in new plants. The share of Nat Gas use in generation is expected to increase to 27% in Y 2020 and 30% in Y 2040, up from 16% and 24% in Y 2000 and Y 2010 respectively. The use of Nat Gas was also found a market in exports.

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Gold’s sharp fall suggests that corrective rebound from 1672.5 is may have finished at 1755. Initial focus is now on the minor support at 1704.5 this week. A clear beak therewill turn near term outlook Bearish. In that case, the decline from 1798.1 should be resuming for a 61.8% Fibo retracement of 1526.7 to 1798.1 at 1630.4.

The Big Picture: Gold’s price actions from 1923.7, the high, are seen as a medium term consolidation pattern. There is no indication that such consolidation is finished yet, and more range trading could be seen. In any case, the Southside of any falling leg should be contained by the support zone at 1478.3/1577.4, and bring a rebound. A break of the resistance zone at 1792.7/1804.4 augurs that the long term up-trend is possibly resuming for a new high above 1923.7.

The Long Term Picture: with the support at 1478.3 intact, there is no change in the long term Bullish outlook in Gold, and some more medium term consolidation may be seen, I still anticipate a break of the psych mark at 2000 in the long run. Stay tuned…

Comex Gold Continuous Contract Weekly Chart

Comex Silver (SI)

The recent development suggests that Silver has formed a short term Top at 34.42 on Bearish divergence condition in 4 hrs MACD.

The initial bias is back on the minor support at 32.90 this week. A clear break there augurs that the rebound from 30.65 has finished, and will turn outlook Bearish for a retest on this support level. But, a move above 34.42 will bring on another rise, I do expect loss of momentum ahead of the resistance at 35.445, and reverse in there.

The Big Picture: as long as the resistance at 37.58 holds, price actions from 26.105 are seen as a consolidation pattern. That means, the down trend from the high at 49.82 is not over yet and an new low below 26.105 may be seen. But, a break of 37.58 dampens this Bearish POV and could bring on a stronger rise back to the high at 49.82 and beyond.

The Long Term Picture: the Big Q is still this, is 49.82 is a medium term or long term Top. With 61.8% Fibo retracement of 8.4 to 49.82 at 24.22 intact, price actions from 49.82 could eventually turn out to be a consolidation only. And a break of 37.58 resistance will significantly increase the odds of a new high above 49.82. Stay tuned…

Comex Silver Continuous Contract Weekly Chart

Nymex Crude Oil (CL)

Crude Oil stayed in a range of 84.05/89.90 last week. The corrective nature of the price actions from 84.05 so far augurs that it is a consolidation pattern. That means that the fall from 100.42 is not over yet. So, while stronger recovery could be seen as the consolidation continues, I expect the upside to be limited by 50% Fibo retracement of 100.42 to 84.05 at 92.24.

On the downside: break of 84.05 will target support at 77.28.

The Big Picture: this current development suggests that price actions from 114.83 are a triangle consolidation pattern. The fall from 100.42 is likely the 5th and the final leg of he consolidation. That said, any Southside should be contained above support at 77.28, and bring an upside breakout eventually. A break of 110.55 will suggest that whole rebound from 33.29 has resumed for a move above 114.83.

The Long Term Picture: Crude Oil is in a long term consolidation pattern from 147.27, with 1st wave completed at 33.2. The corrective structure of the rise from 33.2 indicates that it is the 2nd wave of the consolidation pattern. While it could make another high above 114.83, I see strong resistance ahead of 147.24 to bring on a reversal for the 3rd leg of the consolidation pattern. Stay tuned…

Nymex Crude Oil Continuous Contract Weekly Chart