HEAD FAKE?

Oil ran into resistance as prices approached $80. Technically, even though the previous high from June 28th at 79.38 was surpassed, it drew considerable long liquidation, which should show up on this Friday's Commitments report.

Thursday's run-up was expected but not to the degree that it eventually reached, particularly with speculative interests increasing net long positions to a three week high, according to Friday's Commitments report.

It’s going to take better macroeconomic news or perhaps a storm of "Katrina" proportions to prices out of their recent narrow trading range between $75 and $78. Reflective of the tepid recovery is the not particularly strong  domestic oil demand, which makes it hard to see how prices can extend from a correction into a full blown rally.

Tropical Storm Bonnie broke up over the weekend as well, sparing refineries and offshore production operations. Currently, there is plenty of crude, distillates and gasoline in storage to make it through a couple ferocious storms.

Venezuelan  President Hugo Chavez threatened to suspend his country's oil exports to the US if the diplomatic clash with  Columbia escalates into a martial conflict. Diplomatic ties between the two were severe on Thursday when the Columbian president accused Venezuela of harboring Columbian guerillas.

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