ALERT: GET THE CHEWING GUM AND BALING WIRE READY; THE ELEVENTH HOUR APPROACHES.
 
PETROLEUM MARKET

A surprise build to crude oil stockpiles reported by API and later upheld in the EIA report, extended the rout off Tuesday's high over $3.50 to last night's low of 96.50.The question that participants will be pondering is whether or not the recent technically inspired rally has run its course, or not? The key probably can be found in gasoline.  To see summer gasoline demand down under 9 million is pretty abysmal. Once relatively elastic, the pressure put on households and businesses by rising energy costs can be easily measured by their resistance at the pump, which the demand number shows with brutal clarity. Troubling economic and political events continue to roil the foreign exchange markets, where the rise and fall of the dollar also registers in the oil patch. After earlier falling to record lows against the Swiss franc and three week lows versus the euro, the dollar rebounded as investors took a respite from selling and locked in profits on short positions in the greenback this week. More importantly, why did they do that; the rising yields that will invariably accompany a downgrade, which now seems inevitable.
 
 
TECH TALK

Despite the over $3.50 top to bottom selloff, over two sessions, in crude oil we are not ready to declare a reversal. The latest leg of the recent rally broke from 96.00 and we have barely probed that. In fact, overnight price action has already taken back over a dollar of lost ground before moving back under 97.00 at this writing. Last night's settlement put the market under the 13-day EMA on the daily and weekly charts but settled just above on monthly charts. The ascending triangle has been broken, but a rally back into the wall of it, on settlement will make yesterday's low look like a false breakout, just like Tuesday's high proved to be. The trend off the late June lows may have reversed, so be ready for it, but keep stops tight, awaiting confirmation, which will be a settlement below 96.00.
 
 
NATURAL GAS

Climbing temperatures, later in the week, over the high consumption regions, and a potentially disruptive weather pattern in the Gulf, strengthened buyer resolve somewhat, yesterday. Still, the market could not manage a positive close, anxious as are all markets, over the failure to resolve the looming US debt crisis. Later today EIA will release data measuring domestic stockpiles of gas, a reading we expect will show that 36 bcf was injected through the end of last week. This reading showing the effect of the record high that cooling degree days hit last week. Abundant supply should continue to weigh on prices though, temporary spikes in demand notwithstanding. With that in mind, a  a low pressure system near the Yucatan bears close watching. The National Hurricane Center expects that is will probably develop into a tropical cyclone in the next 48 hours, potentially causing rig evacuations in the Gulf.

 
TECH TALK

The technical picture for gas is static. Intraday bias remains to the downside targeting the recent low of 4.064. The current high level of uncertainty in all markets has driven some participants to the sidelines and consequently, volume is lower than average keeping  momentum is a bit tepid. With lower volume comes higher volatility, so a breakout to the upside that reaches as far as  4.612 will refocus on the resumption of the rebound from 4.064 through the 61.8% retracement of the 4.983 to 4.064 move at 4.632 which will retarget 4.983. Lacking anything new of fundamental import will probably produce more range trading in the 4.20-4.50 area. A break below will favor another fall that might be able to carry to 3.255.
 

source: KilduffReport.Com