THE BUCK STOPS NOWHERE                                   

Any hopes for a significant correction built upon Tuesday's losses were dashed, yesterday, as the market raced to new highs.

The dollar's push to a new low yesterday, and equity futures market declines overnight is generating a mixed picture this morning. Yesterday's inventory report was a clear surprise for the markets, with crude oil stocks dropping over 3MM bbls, against expectations for a 2MM bbl plus rise.

Additionally, the jump in refinery operations and lower imports kept all facets of the inventory report bullish for crude oil. OPEC maintaining output levels steady is also helping the supply outlook but there are concerns that some cartel members may even unofficially tighten production when demand tends to weaken during Q2.

A new geopolitical risk could also be developing as Venezuela has apparently positioned land, air and sea forces near the Colombian border, after Colombia took military actions inside Ecuador to seek out Colombian rebels.

While Colombia's Vice President tried to downplay the risk f war, it didn't seem to asuage the market's concerns. However, if tensions between the South American countries do begin to ease, we would expect part of the risk premium built into prices to be extracted quickly.

The market may have gotten a further boost overnight after a newswire report of a small explosion in Times Square New York at a military recruiting office. While there is little question the market is technically overbought and running well ahead of the fundamentals, trying to gauge the top in this market has so far met with very little success.

Unless the dollar can stage a major recovery, fund buying ebbs, geopolitical risks ease or there is a more profound economic slow down threat, the market's trend will likely remain up and an eventual move to the $110 to $115 price range can't be ruled out.           

J. Kilduff