ALERT: QUAKE, TSUNAMI HIT JAPAN. QADDAFI LOYALISTS DRIVE REBELS FROM OIL FACILITY. NATO, EU PONDER RESPONSE.
 
PETROLEUM MARKETS

Japan experienced a major earthquake overnight on its northeast coast. Initially, the news sparked buying as damage to oil infrastructure was anticipated. But selling soon resumed, erasing those gains as downside pressures on growth offset supply concerns. Qaddafi's forces seem to be experiencing a reversal of their initial fortunes as the experience and training begins to reap dividends. At first glance the sell-off seems unwarranted but consider the larger picture. Investor uneasiness is spreading throughout the entire financial spectrum as a slow recovery in the US, Europe's debt crisis, and now, possibly seriously constricted energy demand growth in Japan. Financial market participants are heading, once again to where they have always run to in times of high uncertainty; the US dollar and liquidating stocks, and commodities to do so. Today's low of 99.01 will probably be the extent of it, for today, at least.
 
 
TECH TALK

Crude oil's correction from the recent high of 106.95 has probably run its course to today's low of 99.01. At worst, the downside should be contained at or above the small gap on the chart. Consolidation that occurs well above that mark may target a test of the 106.95 high and with enough momentum could carry past 110.00. Opinion of the sustainability of these levels though will probably cause another reversal back down particularly if demand destruction begins to be obvious. Today's settlement will probably come in below the 10-day moving average and so extinguish the active buy signal.
 
 
NATURAL GAS

Japan is falling into the sea, Libya is coming apart, Saudi Arabia is experiencing a "day of rage'" and gas just keeps on plodding along. Prices did fall the most since March 1 as supplies slipped 71 bcf, as we predicted, in the week ended March 4 to 1.674 Tcf. Significantly less than most analysts' forecasts. Prices should feel the weight of rising temperatures into next week, as well. Some have obviously concluded that the market as undervalued relative to storage levels and anticipate an intermediate-term price recovery to 4.25 or higher. While we do not hold with this thinking as fundamentals are difficult to overcome, the longer it takes for support to be breached the more it lends credence to a conclusion that a strong base is being installed as a launching pad, once again, for short-covering.
 

TECH TALK

The intra-day bias is neutral as prices consolidate off the 3.731 low from Monday. Even if the market does stage a recovery, the upside is limited to probably the 4.10-4.25 range. Consensus holds that a base is being built in the 3-80-4.00 zone as this has basically described about 90% of the price action over the past few weeks. 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.

source: KilduffReport.Com