ALERT: CRUDE HOLDS GAINS FROM YESTERDAY.
 
PETROLEUM MARKET

Crude oil started the day in Asia on Thursday with calm and tight range trading after yesterday's gains, fueled apparently by the draw in crude oil reported by EIA. While we still think that it is still overvalued, crude  may be correcting some of the heavy losses endured in the past two weeks. Additionally, the dollar was marginally weak yesterday which provided some support as did the reported shutdown of a Canadian pipeline due to wildfires in northern Alberta. With the nagging unemployment problem in the US, Bernanke's hands are tied as far as interest rates are concerned and with an additional 409k seeking unemployment compensation, it appears stimulus is having little effect. Volatility remains high which makes participants wary, and rightly so, given the magnitude of the moves of late. lately. We think the correction still has downside targets to be reach.
 

TECH TALK

Technically and fundamentally, crude seems incapable of building on momentum in either direction. Most likely, range trading will prevail until participants are pushed off the fence from either technical considerations or a news event. Fear of a slowing recovery retards the upside. Technically, crude will likely remain between $102.00 and $94.50. The ongoing failure to consolidate above or below those levels consecutively will mean crude is still confined within the range awaiting markets confirmation over the outlook for the recovery and demand.
 

NATURAL GAS

Gas futures ended up yesterday, rebounding ahead of a weekly inventory report due out today. EIA should report that another 89 bcf has been injected into stocks, not a particularly bullish quantity. Price action took place in a very narrow range, and coming as it does after a sharp sell-off on Tuesday says to us that both shorts and longs are content with these price levels. Some expect rising summer heat and hurricane threats to drive prices higher soon, while record production and tepid demand could keep the market oversupplied, as it has been for some time, and significant cooling demand in the high consumption regions still looks to be a few weeks off. EIA data last week showed total gas inventories climbed to 1.827 Tcf, 249 bcf, or 12%, below last. So when load returns prices could escalate rapidly.
 

TECH TALK

Recovery from 4.109 was limited at 4.330 and weakened, but downside is contained above 4.109 support so far. The moving averages are closing in on each other and losing their effectiveness. But, as of last night, there is an active sell signal, with the settlement below all three. Price action has been on either side of today's pivot at 4.223 so that indicator is neutral. Another break of 4.20 on settlement should lead to long liquidation but acquisition of short positions should not be considered until 4.
 

source: KilduffReport.Com