GETTING DOWN TO BRASS FACTS

Yesterday's bearish inventory report notwithstanding, this morning's price action suggests how difficult it will be in disabusing the bullish bias in the market.

Militant activity reported to have disrupted 50k to 80k of output at ENI's Brass River facility in Nigeria was apparently enough to put prices up  over $100 again, after falling in overnight trading.

ENI has since announced that Brass River loadings were unaffected. The Commerece Department reported that GDP grew 2.2% percent for all of last year, which is the slowest since 2002.

Federal Reserve Chairman Bernanke warned on Wednesday that the economy remained at risk, but he also cautioned that inflation had risen and was being watched closely.

Seven consecutive weekly builds have made the market's internal fundamentals less supportive; there are a variety of other factors that could discourage sellers. A technical correction in crude oil could be limited by the dollar's entrenched downtrend attracting more speculative buyers to the crude oil market.

Aggressive buying behavior by investors into commodity markets, including energies, will probably not be shelved anytime soon, especially since inflation fears have been stirred up again, as investors continue to seek diversification.

Another factor that could limit a break in crude oil and possibly send the market to fresh highs is the idea that Saudi Arabia and/or Iran may unofficially cut back on supplies to keep oil prices firm in the face of a lingering global slowing threat.

So far, the market has not broken out, but rather has been trading in a large consolidation pattern between 86.00 and 102.00. The longer it takes to actually break out above resistance at around 105.00, the heavier the market will look as holders of length grow increasingly impatient. For the moment though, participants first reaction is to buy.
                                        
M. Fitzpatrick