Are you ready for the next major move in crude oil?

COT Data

Last week in the COT legacy report we see commercials net-short -176,088 contracts, not changing much over the past six weeks. But what really is happening? Look at the disaggregated report and you can see the Producers (true commercials) are actually net-short -117,234 contracts. Swap Dealers are net-short -58,854 contracts and Managed Money is net-long 174,381 contracts. Look back and you can see that Swap Dealers went net-short crude for the first time in November 2010. Look at the price of crude when these folks had a 52-week net-short low.

Commercial Net Tracker instructions: This form tracks the Commitment of Traders (COT) data for the commodity futures market. This form "looks" at the most recent five weeks of COT data and provides visual indications of the data. A) If the current value is at a 12-month low, the cell will display a red/burgundy background. B) If the current value is at a 12-month high, the cell will display a green background. C) If the current value went from net negative to net positive, the cell will display a blue background (indicating a bullish condition). D) If the current value is both a 12-month high and also went from a net negative to a net positive, the background will be green. You should view the data with green backgrounds to determine if they also went from net negative to net positive.

If you need help understanding how to understand how to use the COT report to your benefit, please email me at Gary@crbtrader.com and put COT report in the subject line. Please include your name and telephone number in the email.

Proceed to Page 3 for this week's detailed fundementals charts...

Fundamentals

Crude oil prices slipped to a five-week low after global recession concerns prompted OPEC to unify and increase its production ceiling for the first time in three years to 30 million barrels a day from 24.845 million barrels a day.

Other bearish factors include:

1. The rally in the dollar index to an 11-month high.
2. The larger-than-expected increase in weekly DOE gasoline inventories, which climbed to an 8-1/2 month high (+3.82 million bbl to 218.8 million bbl versus expectations of +1.0 million bbl).
3. Global economic growth concerns after November China exports rose at their weakest pace in nearly two years and Germany’s Ifo institute cut its 2011 and 2012 German GDP forecasts.
4. The ongoing European debt crisis that drove the S&P 500 to a two-week low and reduced confidence in the economic outlook and energy demand.

Bullish factors include:

1. Speculation that global crude supplies could be disrupted after Iran’s news agency reported that Iran’s military will hold drills to close the Strait of Hormuz, where about a sixth of global crude supplies flow through each day according to the DOE.
2. Stronger-than-expected U.S. economic data after weekly initial jobless claims fell to a 3-1/2 year low and the November Philadelphia Fed manufacturing index rose to an eight-month high.

Fundamental outlook — Short-term bearish — Crude oil prices weakened further after OPEC raised its output ceiling and ratified Saudi Arabia’s high production level.

Other bearish factors include:

1. The boost in weekly DOE gasoline supplies to an 8-1/2 month high
2. A slowdown in Chinese growth
3. Record Russian crude output
4. The resumption of Libyan production

Bullish factors include:

1. Iran concerns
2. Stronger-than-expected U.S. economic data
3. Generally strong crude oil demand.

Have a prosperous trading week AND A VERY MERRY CHRISTMAS!

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