ALERT: CONCERNS OVER GROWTH WEIGHING ON OIL.

PETROLEUM MARKET

Oil has moved lower again today as doubts about the US economy and its ability to sustain demand growth trump geopolitical tensions. The hike in crude stockpiles, reported yesterday, and the disappointing 474k that applied for unemployment compensation last week will only heighten these fears. Risk appetite looks to be diminishing as investors seem to have found new allure in the dollar at these levels. Certainly, the Euro-debt crisis shows no sign of abating, and China seems determined to wring inflation out of their economy with more rate hikes, not a good scenario for upward momentum. Separately, the ADP estimated that payrolls increased +179K in April, easing more than expected from a +201K gain in the prior month, certainly not what policymakers were hoping for. The high levels of unemployment and sluggish growth should mean the the Fed will certainly maintain expansionary monetary policy. No surprise there.


TECH TALK

The bias for crude has turned decidedly bearish in the near term. The market has breached technical support before the market even opens. The settlement below the 10-day moving average on Tuesday extinguished the buy signal and a settlement today below the 40-day moving average will activate a sell signal. What we initially thought might be a counter trend correction may turn out to be quite a bit more. Congestion from early April near 108.00 has been more easily breached than we thought. Support at 106.00 looks to be holding, for the moment, but today's low is definitely within striking distance. A move below, on settlement will open the way for a challenge to 98.00, the mid-March lows.
 

NATURAL GAS

With the market approaching the 10-day moving average, some technical selling is to be expected, particularly with the EIA report later this morning. We expect EIA to report that an additional 71 bcf was injected into storage, considerably less than the 83 bcf for the same week last year and the five year average build of 78 bcf. With the unusually high level of nuclear outages, the market will probably not settle through 4.50, even though supplies are ample, the weather is mild and seasonal cooling demand is still a few weeks away. Also supportive, the Baker Hughes gas drilling rig count has dropped in three of the last four weeks. Still,  gas prices are up 14% since bottoming at $4 three weeks ago.
 
 
TECH TALK

The chart has posted a temporary top at 4.729, a three-month high which was hit on Monday. The market has shed of $4.729 on Monday, but has shed 2.6% in three sessions this week, its biggest three-day drop in four weeks. The rally through key  resistance in the 4.50 area turned the chart picture bullish and makes that mark support. As long as this holds on settlement basis, the upside target remains the January high of 4.879. If breached however, another assault on 4.00 is possible. The market is now through the 10-day moving average and a settlement there would extinguish the active buy buy signal. The market is also well below today's pivot of 4.606 which shows the front end weakness.

source: KilduffReport.Com