ALERT: FRANCE, UK AND US BEGIN NO-FLY ZONE TO PROTECT LIBYAN REBELS.
 
PETROLEUM MARKETS

The consideration for market participants, as it has been for several weeks is the value of curtailed Libyan exports versus the drop in demand from Japan. The consideration now focuses on the quality of those Libyan exports and the diminution of spare capacity. The Saudis have plenty of crude, but it is mostly the difficult to refine high sulfur strain and Libyans have the sweet crude that will be going into gasoline manufacturing, in Europe mostly. Most experts now think those will be curtailed indefinitely, no matter which side wins out. While there is a very good chance that crude prices are a bit overdone on the upside of 102.00 it will take quite a bit of demand destruction, not only as a result of Japan's calamity, but also that which can be associated with higher prices to bring prices to 90.00 or so.
 
 
TECH TALK

The pullback from the recent high at 106.95 is still playing out. In fact, it may extend to 95.00 or so, 50% retracement of the last leg up from 83.85. In a larger context 103.39 is the 61.8%  off the 147.27/32.40 move from 2009. For the moment though there has been little follow on selling from the breach of today's support at 102.37, which has only extended to 102.10. Next support comes in at 101.65 but there appears little commitment so far to push for it.
 
 
NATURAL GAS

As we thought, momentum is starting to fade as market participants consider the structural imbalances in the market. Prices had been moving higher lately on the idea that loss of nuclear power generation in Japan would reduce LNG imports into the US. A pattern of rising, then falling and rising again beyond previous highs had begun to paint a picture of strong resistance that was prompting more short-covering with each successive bump. Add to it the expectation of below normal temperatures through April 4th and the rally should be explained. In fact yesterday's price action at the outset made us think the current rally had legs; but it appears not. The fundamentals are just too difficult to overcome, particularly with seasonally lower demand just around the corner. Gas inventories have been steadily rising since Feb. 18 and stocks may end the heating season as high as 1.549 Tcf. Shed length above 4.25.
 
 
TECH TALK

The unsteady recovery from March 7th's 3.731 low and the inability to settle above the 200-day moving average says to us that a temporary top may be in place at 4.23, yesterday's high. There is a flag formation off the staff of last Thursday's price action that also gives little hope for an extension of the rally. There is still a buy signal in place with prices above the major moving averages and with price action above today's pivot of 4.169 for the last few hours makes the market look like it more to go; do not trust it.

source: KilduffReport.Com