ALERT: CRUDE PRICES STABILIZE. DOLLAR DIRECTION KEY FACTOR
 
PETROLEUM MARKET

Oil prices fell to 95.25 early, yesterday, but managed an impressive rally to nearly $100.50 later in the session. So, the wide daily ranges persist, and conviction about the next direction is difficult to acquire. A retaliatory bombing in Pakistan by Al Qaeda killed 80 people, but does not seem to have stirred the geopolitical premium. Yesterday was another day where the inverse relation to the dollar was very much at work, and that persisted overnight. France and Germany posted better than expected GDP readings and the dollar index retreated back below 75 pushing crude up to its highs. Concerns over Greece persist, however, as the country is being called out, yet again, for failing to make necessary reforms. Economic data out this morning was unremarkable: the transitory consumer inflation reading was in-line with expectations, despite surging retail gasoline prices. After digesting the data, the dollar index got back to even. While there is some seeming resiliency to prices, the edge has to go to the bears. Prices have settled into a new lower range, and the reduced demand estimates from IEA and others are endemic of the economic headwinds that persist. Downward price pressures should persist, but considerable excitement will also persist with the spasmodic upward and downward prices lurches of the past week
 
 
TECH TALK

Crude oil prices are currently in the middle of an approximate $10 range defined by the recent low of 94.63 and the recent recovery high of 104.60. The critical level to observe is the 100-day MA at 98.27 -- a break of that level will likely result in another sharp move lower. We point out that the recent bars are quiet wide. And several of the recent ranges were preceded by price moves of remarkable swiftness lending a cliff like approach to technical analysis. Beyond the 100-day the next critical area of support is between 94.40-94.50. The area represents Thursday's low and several trend support lines (monthly, weekly) come into play in that area (94.44). A break of that support will likely see prices tumble back into the multi-month channel bounded by 88-93 per barrel. On the upside, $100.70 is resistance.
 
 
NATURAL GAS

Natural gas prices rose slightly along with the general recovery that ensued for energy in the aftermath of the recent sell-off. Supplies of gas continue to dominate the circumstance with the EIA reporting a 70 injection in its weekly report. The market's upside should be limited in the near future with a lack of cooling demand being seen and a return of some nuclear capacity. We are in triple-digit injection season, and absent some heat in the South, we should being seeing rising injection levels. If there is a longer-term bullish aspect for prices, it's the increasing focus on shale drilling activities. The EPA is on the beat making requests for chemical information and studying groundwater impacts. A university study came out, yesterday, that claimed high levels of methane were being found in well water near shale gas production facilities. Beyond that, we still believe a trade down to $4.00 appears to be on the horizon.
 
 
TECH TALK

The downward trend channel from the recent spike lower continues to evidence itself. Yesterday produced a lower low and lower high after the previous days "outside" day. The 4.10 area remains critical support, a break of it argues for further downside test of the recent June contract low of 4.055. The slope of the price decline is quite steep and some bouts of corrective short-covering are likely. For the chart to turn positive, prices need to rise above the pivot of 4.23.

source: KilduffReport.Com