ALERT: FED SEES KEEPING INTEREST RATES LOW THROUGH MID-2013.  
 
PETROLEUM MARKET

The initial reaction to breaking news in the markets is often wrong, with sometimes spectacular reversals ensuing in short order. This was the case, yesterday, on the release of the Federal Reserve rate decision. The Fed did not come across with any new concrete measures, offering only a reference to "additional policy measures" and putting a date certain (mid-2013) on the current extremely low interest rate environment. At first blush, it did not seem like much. The market's embrace is somewhat curious given how ineffectual the hyper-low interest regime has been in Japan for the last decade and here in the US. But, like everyone else hoping for an improved economy, we'll take it. Oil prices have recovered modestly, and seem to have stabilized over $80 for now. The Fed's decision, however, is a reflection of the languishing global economy. Both OPEC and the EIA downgraded their demand forecasts, yesterday, and the IEA, earlier today, is warning that its 2012 demand growth estimate could be halved to 600k, if global GDP growth falls to 3%, which now appears likely. One of the most cogent arguments for the rally off the Fed decision is that the markets now do not have to be concerned that a quarter or two of decent growth will result in a monetary policy U-turn. This is what enabled the long-end of the treasury curve to be bought, yesterday. Keeping it basic, Libyan oil remains off-line, and North Sea production curtailed. These are real losses. We would expect further gains to be made, in the short-term, up toward $90 per barrel. --John Kilduff  
 

TECH TALK

Prices look to be exhibiting some consolidation just above the $80 level. And Monday evening's low of 75.71 has the look of a blow-off bottom. That print admittedly occurred in the thin overnight electronic session, but the chart does not discern from these elements. We see the 50% retracement from the high on July 26th of 100.62 and the referenced low of 75.17, which is 87.62, as the near-term upside target. Prior to that, look for $84 to represent first resistance, a break of which would install 84-88 as a likely range. On the downside, $80 continues as a key support level with Monday night's low of 75.17 as representing a support point. A break of 75.17 would set us up for move to the 71.30 area. -JK
 
 
NATURAL GAS

Natural gas prices rose with rest of the markets, climbing above $4.00. The heat in the South continues to be supportive even as temperatures moderate in East. The overall view of the economy was lifted somewhat by the Federal Reserve rate decision and the commitment to keep rates low into 2013. Gas prices benefited both from the expectation of a pick-up in industrial demand and buoying of commodity prices that occurs from hyper-easy monetary policy. There may be another tropical storm developing, but it is in the very early stages. Thursday's injection report may the last best hope for the bulls, with the ability of the atmosphere to produce intense heat waves and cooling demand rapidly on the wane. We would expect more upside correction into Thursday's report. The last several reports have produced intense sell-offs, as the estimates become clearer, we will see if another set-up is the making.-JK
 
 
TECH TALK

The chart looks to be rising steadily off the 3.855 low from Monday. Prices spent much of yesterday above $4.00. The next upside resistance is seen 4.058 and 4.063. Next up is 4.09, which presage a return to the extended range between 4.10-4.30 that dominated much of the price action over the past several months. Below 3.855, additional support is seen at 3.80 and 3.73, which is our downside target. Ultimately, a longer-term move lower has us projecting a downside target of 3.369. Yesterday saw another rather wide price range, so a wider view of the chart needs to be taken and it is recommended that positions be sized accordingly.

source: KilduffReport.Com