CAMERON HANOVER

[DAILY PETROSPECTIVE] November 12, 2010

Energy Prices Settlements

Heating Oil Crude Oil

Month High Low Settle Change Volume Month High Low Settle Change Volume
DEC 242.81 234.95 236.32 -6.34 42154 DEC 87.85 84.52 84.88 -2.93 423357
JAN 243.96 236.79 238.06 -6.27 18688 JAN 88.32 85.03 85.34 -2.94 163571
FEB 244.80 238.00 238.90 -6.13 9422 FEB 88.65 85.52 85.80 -2.89 50415
MAR 243.64 238.18 239.11 -6.00 4005 MAR 88.86 85.95 86.22 -2.85 28220
APR 241.50 237.35 238.04 -5.95 949 APR 88.39 86.32 86.56 -2.83 10851
MAY 241.00 237.30 237.44 -5.95 721 MAY 88.85 86.76 86.87 -2.82 7046
JUN 241.45 236.26 237.45 -5.94 3058 JUN 89.27 86.90 87.12 -2.80 18698
JUL 242.01 240.28 238.40 -5.92 80 JUL 88.96 87.22 87.34 -2.78 3787
AUG 243.37 238.97 239.54 -5.90 97 AUG 89.09 88.92 87.54 -2.77 3246
SEP 244.95 242.95 241.11 -5.88 71 SEP 89.62 87.71 87.74 -2.76 2318
OCT 244.89 244.74 242.92 -5.88 17 OCT 89.58 87.93 87.94 -2.74 1341
NOV 247.82 244.93 244.85 -5.88 35 NOV 90.18 88.03 88.15 -2.72 1398

Unleaded Gasoline Natural Gas

Month High Low Settle Change Volume Month High Low Settle Change Volume
DEC 225.61 218.88 220.99 -2.58 52762 DEC 3.940 3.806 3.799 -0.128 107767
JAN 221.25 215.08 216.52 -4.93 50697 JAN 4.133 3.987 3.982 -0.129 66890
FEB 220.80 216.24 217.01 -5.41 18065 FEB 4.144 4.010 4.001 -0.130 14390
MAR 222.11 217.69 218.53 -5.58 12021 MAR 4.109 3.990 3.982 -0.125 14347
APR 233.56 229.17 229.85 -5.81 5775 APR 4.093 3.979 3.969 -0.122 12548
MAY 234.13 230.55 230.86 -5.89 1919 MAY 4.140 4.017 4.008 -0.121 4668
JUN 235.38 230.62 231.42 -5.95 2473 JUN 4.180 4.076 4.064 -0.116 1851
JUL 232.35 230.97 231.32 -5.97 454 JUL 4.242 4.141 4.131 -0.112 1298
AUG 232.64 230.69 231.03 -5.96 713 AUG 4.292 4.188 4.178 -0.112 1185
SEP --- --- 230.07 -6.01 0 SEP 4.307 4.193 4.192 -0.113 1217
OCT 222.46 222.40 220.69 -6.09 37 OCT 4.350 4.274 4.268 -0.115 5249
NOV --- --- 219.79 -6.19 0 NOV 4.576 4.515 4.508 -0.105 1083

Early Evening Review for Friday

We should almost start handicapping this market by starting
each week with a number of unlikely scenarios, and examine their
most likely responses, followed by a comparison with that week’s
most likely scenarios, with an analysis of their least likely responses
or reactions. We should then mix these together and construct an
imaginary committee’s most implausible combination, from which
we would choose the least desirable from both bullish and bearish
perspectives. Where they intersect is what we should expect to
see. And, no, we are not just trying to vaporize in an amusing way.
We will actually go through it to show how we got the week that
www.clipartguide.com
has just concluded.
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CAMERON HANOVER
[DAILY PETROSPECTIVE] November 12, 2010

On November 5th, we had a stock market that had just exploded to its highest levels for 2010, and
the most likely follow-through for the
week just ended was that stock prices
would continue to register new highs,
possibly after a correction which might
conceivably return quotes to their
breakout point. The least likely result for
the week seemed to be the sudden
realization that QE2 had been
discounted in the six weeks leading up to
last Wednesday’s FOMC resolution to
adopt QE2 to bolster the US economy. A
week ago, there seemed to be an odd
sense of disappointment over the best
employment report in months, but it
looked like pre-weekend profit-taking (a
week ago).
We had many of the same factors at
work with the US dollar as we ended an
exciting week on November 5th. The greenback had melted down to new lows for 2010 against the
euro, and made new 15-year lows against the Japanese yen. When it rallied on Friday, November 5th, no
one expected that it would, or even could last. Investors would have reasons to return on Monday, or
Tuesday at the latest. The least likely result was that the dollar would rally all week long, but it did.
So, that gave us the least likely scenarios of the dollar advancing and equities falling because QE2
had already been discounted. And those were the scenarios we seem to have had. As a result, oil prices
should have fallen, but for most of the week they refused to do so. We had the least likely reaction to
the least likely events. After ignoring fundamentals, which had been dreadful for a solid nine or even 10
months, oil prices took another unlikely route, by following their fundamentals, which had been so
completely unlikely to be supportive (but now were) higher.
On Friday, that was what we had seen over the first four days of the week that just ended. Prices
had been expected to advance because of QE2 and despite weak demand and ample stocks. Instead,
prices advanced on a spectacular shift in demand (higher) and declines in inventories, despite the
curious case of quantitative easing. It was a week with a not-missile coming out of nowhere in California
and with QE2 disappearing in the Bermuda Triangle.
On Friday, data from China showed inflation at levels worse than expected (higher) and investors
were forced into grinding their gears to turn direction to face a potential increase in Chinese interest
rates or other steps designed to cool the overheating engine of Chinese growth. Of course, that’s the
only engine that is firing on all cylinders right now, and the anticipation of cooling moves cooled markets
around the world.
The DJIA was down 90.52 to 11,192.58. Crude ended the week down $1.97, heating oil finished
with a net loss of 2.16 cents a gallon and gasoline managed to settle up 2.99 cents.

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CAMERON HANOVER
[DAILY PETROSPECTIVE] November 12, 2010
Technical Views

Crude oil prices dropped steeply on Friday as technical pressures pushed quotes lower. A weaker DJIA and a stronger dollar
through the week helped knock oil prices from their earlier heights.

The DJIA ended the day down 90.52 to finish at 11,192.58. The DJIA still has support below the market, and a strong week next
week would leave this all as a distant memory.

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