Crude Oil and Natural Gas Move in Opposite Directions

WTI crude oil futures continue to trade steady around US$87.00. Egyptian voters approved a distinctly Islamic constitution that was put up for a referendum, but the margin was slim and should keep opponents still in the game. A report on Syria today, said that neither side had enough strength or power to win a clear victory, which means that this civil war could go on for years destroying the country. Even though Syria is not an oil producing country, it helps keep tensions in the Middle East elevated and could serve as a spark. Tensions continue to climb in Libya limiting price declines.

Crude oil prices rose on Friday on expectations that demand in China will improve after data showed the manufacturing sector expanding this month, and with the weaker U.S. dollar also lending support to oil prices. This weekend China leaders pledged to keep its economy healthy but changed the language in its description of monetary policy leading traders to believe that the country is no longer looking for huge growth increases but wish to sustain a growth rate around 7.5% with recent eco data supporting the recovery of the Chinese economy, markets are trading in a firmer note.

Iran’s oil revenues have been cut in half this year compared with last year, a newspaper quoted Iran’s economic minister as saying, an admission of how deeply Western sanctions are cutting Tehran’s chief source of funds. President Obama will be asking Congress to add gold to the list of embargoed items, tightening the noose around Iran.

Money managers, including hedge funds and commodity trading advisers, cut their net long position in natural gas futures, options and swaps in the week to Dec. 11, data from the U.S. Commodity Futures Trading Commission said. Natural gas plummeted to trade below the 3.30 range after just weeks ago hitting recent highs of 3.9999. Natural gas futures declined to 11-week low on NYMEX, its third weekly decline, as forecasts showed warmer-than-normal weather in late December that would reduce heating demand. The number of rigs actively exploring for oil and natural gas in the US fell this week by one to 1,799.

The dollar index, which measures the greenback against a basket of six major rivals, edged lower to 79.552 helping to support price increases as a drop in the US dollar makes the purchase of dollar denominated commodities less expensive for foreign investors.

Worries about the resolution of the US Fiscal Cliff and new tax increases weigh heavily on speculators who do not know what tax consequences will have on profits and trades, with the year-end deadline approaching traders are being forced to take proactive moves to protect from tax changes.

Crude oil is expected to remain weak with early projections calling for an increase in EIA inventories.