CAMERON HANOVER

[DAILY PETROSPECTIVE] November 22, 2010

Energy Prices Settlements

Heating Oil Crude Oil

Month High Low Settle Change Volume Month High Low Settle Change Volume
DEC 230.49 224.39 226.86 -0.58 19707 JAN 82.87 80.68 81.74 -0.24 220233
JAN 232.24 226.11 228.56 -0.62 35527 FEB 83.43 81.30 82.33 -0.25 52729
FEB 232.93 227.10 229.52 -0.57 12207 MAR 83.91 81.82 82.83 -0.24 23984
MAR 233.07 227.61 229.73 -0.64 4758 APR 84.25 82.24 83.19 -0.24 7961
APR 230.85 226.78 228.75 -0.64 2555 MAY 84.49 82.59 83.48 -0.24 6607
MAY 229.63 226.13 228.08 -0.58 1456 JUN 84.78 82.85 83.75 -0.25 15345
JUN 231.42 225.71 228.05 -0.52 5383 JUL 84.32 83.30 83.99 -0.25 2950
JUL 228.75 226.61 228.98 -0.51 1027 AUG 83.67 83.45 84.21 -0.25 1209
AUG --- --- 230.17 -0.51 239 SEP 84.51 83.56 84.43 -0.24 1549
SEP --- --- 231.69 -0.51 123 OCT 84.30 83.93 84.64 -0.24 1227
OCT 231.84 232.26 233.56 -0.51 72 NOV 84.19 84.00 84.85 -0.24 1770
NOV --- --- 235.39 -0.51 0 DEC 86.07 84.16 85.08 -0.24 12952

Unleaded Gasoline Natural Gas

Month High Low Settle Change Volume Month High Low Settle Change Volume
DEC 221.50 213.03 215.19 -4.41 17041 DEC 4.280 4.125 4.271 0.107 93727
JAN 215.00 207.85 209.77 -2.94 37845 JAN 4.405 4.285 4.432 0.108 91016
FEB 214.38 208.17 210.15 -2.20 18889 FEB 4.405 4.292 4.435 0.115 26045
MAR 215.66 210.02 211.75 -1.88 8987 MAR 4.385 4.255 4.389 0.111 23793
APR 224.49 221.05 222.51 -1.55 3049 APR 4.314 4.218 4.339 0.103 18621
MAY 226.30 221.65 223.47 -1.34 1658 MAY 4.336 4.247 4.365 0.101 4217
JUN 227.25 222.47 224.05 -1.21 2027 JUN 4.382 4.298 4.413 0.101 2180
JUL 226.10 223.78 223.87 -1.08 311 JUL 4.440 4.358 4.471 0.100 1670
AUG --- --- 223.39 -1.04 0 AUG 4.484 4.400 4.510 0.099 1084
SEP --- --- 222.33 -0.98 0 SEP 4.498 4.414 4.527 0.102 1152
OCT --- --- 212.38 -0.92 0 OCT 4.578 4.487 4.607 0.104 5569
NOV --- --- 211.43 -0.87 0 NOV 4.789 4.714 4.818 0.104 1248

Early Evening Review for Monday

The oil complex was mildly lower again on Monday, with
gasoline prices leading the way lower. Gasoline had been
gaining on both heating oil and crude oil in recent weeks, and
the gains were very premature for anything seasonal. It seems
that the counter-seasonality of the strength there finally caught
up with the market on Monday.
For the complex, including gasoline, Monday’s biggest factor
was a worry that the problems that pushed Ireland (and Greece
before it) to ask for help could be part of a larger contagion that
could touch a number of EU countries. This concern manifested
www.nasa.gov/missions/science
itself as a stronger dollar, which led to selling in oil futures.
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CAMERON HANOVER
[DAILY PETROSPECTIVE] November 22, 2010
After weakening at the end of last week, the US dollar started this new week with a lower opening,
which was followed by sideways movement until about 3 AM EST Monday morning. From that point
forward, the dollar climbed steadily against the euro until trading subsided at about 2 PM. Prices
weakened slightly after that, but moved predominantly sideways into the early evening.
Oil traders had gotten back into the
habit of taking their cues on oil trading from
the dollar and from equities. We had seen a
sharp move lower in the greenback
accompanied by a steep gain in the DJIA on
Thursday last week, but those moves were
unable to sustain themselves into Friday or
this new week. For reasons that escape us,
what had been the main factor in currency
and equities trading – quantitative easing, or
“QE2” – suddenly stopped being the leading
feature in a number of markets just as soon
as it became official policy.
It is normal to get trading ahead of an
event, with the “buy the rumor, sell the fact” kind of counter-reaction once a policy becomes official.
Still, QE2 involves the ongoing purchase of treasury instruments by the Fed, and there is still plenty of
time before the program even starts to wind down. The Fed effectively left the door open for a
continuation or increase in the purchases, should that be deemed useful, so this round of quantitative
easing should have plenty of distance left in its “legs.”
And, as long as we are on the subject of anticipation of events and their actual arrival, last week’s
biggest concern was that China might raise interest rates or increase banks’ reserve requirements. The
Chinese central bank did raise reserve levels on Friday. Normally, that would have been seen as the
fulfillment of that particular round of anticipation. More tightening could be coming, but it is not all that
likely this week.
Perhaps, it is just as well to write this all off as pre-Thanksgiving randomness. When we started in
this business, one of our mentors told us that no matter what position one took this week, it would find
a way to lose money before the turkey was served. Eddie Murphy seemed to touch on that in “Trading
Places,” when he talked about traders being more interested in buy the “GI Joe with the kung fu grip.”
We know it was a throwaway
line in a just-for-fun movie DOE Expectations, Using Surveys By:
that could not even price Pork Category Dow Jones Bloomberg Reuters
Bellies or FCOJ properly (in Crude Oil dn 1.800 dn 2.000 dn 2.300 mln bbls
either correct increments or Distillate dn 1.500 dn 0.900 dn 1.200
with any awareness of daily Gasoline dn 1.000 dn 1.250 dn 0.900
limits), but there was an Utilization up 0.2% up 0.2% up 0.2%
element, a small kernel of
truth. No one enters new positions this week and, with so many people getting out of positions, we
tend to see some rather strange or just contrary moves.
This week’s DOE report will be out on Wednesday, at its normal time, and the EIA underground gas
storage figure will come out then, as well, giving traders a couple of hours to trade before they go home
or hit the road for grandmother’s house. We will not get a considered, lingering reaction.

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CAMERON HANOVER
[DAILY PETROSPECTIVE] November 22, 2010
Technical Views

Crude oil prices dropped again on Monday. Losses were light in crude and heating oil and larger in gasoline futures on Monday.

The DJIA ended the day down 24.97 to 11,178.58 on Monday. Equities did not help oil prices on Monday.

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