ALERT: IEA SENDS A SIGNAL
 
PETROLEUM MARKET

Crude oil staged another dramatic drop after the news that release of 60 million barrels of oil from government-held
strategic reserves was announced by the 28-member International Energy Agency. The IEA said it would release 2MM bpd, mostly crude, over an initial 30 days to offset the disruption to Libya's output. The US will provide half the volumes with Europe supplying 30%  and the rest from Pacific OECD nations. Additionally, higher than expected jobless claims and a fall of new single family homes added to oil's dismal prospects and pushed prices to 89.69 before recovering to settle at over 91.02. The market has tested as low as 90.52 this morning's Q1 GDP report disappointed, as well. So there you have; an increase in supply and the picture of an economy hardly poised to generate much energy demand growth, a tough combination to overcome....BUT, that's what everyone thinks, so beware opening fresh shorts until 90.00 is broken on settlement.

 
TECH TALK

After testing 95.00 zone, crude oil fell sharply to test the major ascending trend line support below 90.00. The farthest reaches of our target of 92.00-96.00 has been reached. Closing below the low parameters of our analysis suggests more bearishness. Clearly the bias is to the downside. However, we are wary when markets move this quickly, and not surprisingly the relative strength is showing a bullish divergence. We no expect a trading range of 88.00-92.00. A close above 96.00 would turn the bias bullish again. This may be all the bears are able to accomplish for the moment and with the approach of the long holiday weekend next week, month and and quarter end profit taking is a very real possibility.  
 
 
NATURAL GAS

Gas broke below technical support after EIA reported a larger than expected 98 bcf injection to already bulging stocks, bringing the total to 2.354 Tcf. Consensus estimates were closer to 88 bcf. The build narrowed the inventory shortfall relative to last year by 17 bcf to 258 bcf, or 10%, and trimmed the gap to the five-year average by 12 bcf to 64 bcf, or 3%. With longer term weather forecasts showing temperatures around the country hewing closer to historic norms, comfortable inventories and record high production will likely make it difficult for prices to move significantly higher without a broader-based heat wave or a serious storm threat to Gulf of Mexico gas output. Conversely, it will also be difficult to break through support, just below 4.00, which has been strengthened by several previous tests.
 

TECH TALK

Yesterday's post-inventory break makes the chart look even more bearish. Front month has closed lower in eight of the last nine sessions, shedding 12% while breaking some key support points along the way. Yesterday, in fact, the market briefly broke the 200-day moving average near 4.16 but rallied before settlement. The inability to do so will cause some to conclude another oversold condition is building, with the relative strength index at its lowest level since February.

source: KilduffReport.Com