BAGHDAD HOLIDAY                                           

The market may not see any extensive price correction until a weakening economy and consequent sagging oil demand become blatantly obvious.

For the moment, energy markets remain more focused on supply issues than the weakening prospect for oil demand. Some geopolitical premium may have been extracted with the withdrawal of Turkish troops from northern Iraq.

Curiously, However, none of the bearish news last week was apparently critical enough to turn market sentiment. Part of the price gains in crude oil were based on ideas that some OPEC members will unofficially cut production this spring.

Even though the probability is quite low that any production adjustment will be attempted, it was discussed relentlessly. So continued uncertainty ahead of the OPEC meeting on Wednesday will likely put at least a temporary floor under prices.

The dollar trending lower will also provide an impetus for speculative interests to keep building length in energy contracts. Geopolitical concerns will also continue to support given that Nigeria is heating up again, and UN investigators may have found evidence Iran's nuclear program is linked to weaponry.

Furthermore, Iranian President Ahmadinejad’s presence in Baghdad over the next several days should speak volumes to his country’s designs on the region.

Participants seem to have decided to ignore the market's worsening internal fundamentals and an overbought technical status which seems to justify a deeper price correction. they will probably continue to do so until it becomes impossible to ignore.                      

J. Kilduff