ALERT: SPAIN'S DEBT DOWNGRADE BRINGING SOVEREIGN DEBT INTO FOCUS AGAIN. LIBYA'S EAST/WEST SPLIT HARDENS AS NATO MULLS NO-FLY ZONE.
 
PETROLEUM MARKETS

Violence in Libya is ramping up. Their oil production, for all practical purposes, is off the market. Production and storage facilities within the country have been damaged, which implies that it could be some time before it returns no matter who prevails in the civil war now raging. So the rationale behind oil's almost $4.00 fall from its recent high just a few days ago must be elsewhere. There is a ready answer to that in a surprising plunge in Chinese exports and the downgrade of Spanish debt. This calls into question recent calculations of demand going forward if it is going to cost not only Spain , but the rest of the EU countries significantly more to borrow. As a consequence, the dollar is rallying at the expense of the euro and helping to weigh on oil. Europe's problems are not going away, nor is the restiveness in Libya. Do not look for a return to the status quo ante. The respite for oil may be temporary, until Libya is resolved.
 
 
TECH TALK

 The chart still gives an overwhelmingly bullish look with prices well above the moving averages which are arrayed to depict a rising market. It looks like support in the 102.70 area is holding, as well. If it does not, then there is a possibility that the active buy signal could be extinguished tonight at settlement.
 

NATURAL GAS

Just like  Ol' Man River, gas prices "jus' keep rollin' on, confined to a zone just below 4.00 and just above the 3.60-3.80 support zone. Fundamentals keep prices from breaking out and technicals keep them from breaking down. A careful examination of the Commitments report will be required to see how this stalemate will be broken. Look for EIA to report a pull from stocks of 71 bcf later this morning. Winter heating demand is fading fast and there is littler on the horizon to change that. The longer it takes for support to be breached the more it lend credence to a conclusion that a strong base is being installed.
 

TECH TALK

Note the box on the chart. Most price action has fallen inside it for the last month without breaking down. This provides a good picture of a base. We say "base" because the general trend for the last three months has been down. Of course, if this is breached significantly it will become a zone of resistance. Otherwise the chart keeps transmitting a generally bearish look with prices below the major moving averages which are also arrayed to depict a falling market. Price action around the pivot of 3.905 has been mixed which shows some nascent strength in the front of the market.

source: KilduffReport.Com