IntroView
 
Renewed concerns over the health of the European banks are pressuring markets in overnight trading. The lead story in this morning's Wall Street Journal cites terrific concerns from the Federal Reserve over the state of European Banks and their US operations. The article mentions Societe Generale and Deutsche Bank as vulnerable due to their heavy reliance on borrowed funds to maintain their US affiliates. Equity markets are down, and gold is back over $1800 per ounce, likely on its way to $2000 before year-end. The comparisons to 2008 are starting to creep into the discourse. This is round two for rumors involving Soc Gen. The Mer-Kozy dud of a meeting looks to be met by a thud in the markets into the weekend.
 

Petroleum Markets
 
Crude oil prices are under pressure again today, after a week's short-covering rise, consequent to expectations that European and US economies will affect negatively on demand. The cue was taken from the EIA report which showed that US crude inventories rose, indicating faltering demand. Additionally, the USDIX which measures the dollar's performance against other six major currencies advanced today giving oil another reason to fall. Asian stocks fell for the first time in four days as well. Worries about the US economy and the European region are very much alive and they are expected to continue a slowing pace until the end of the year particularly because a corrective policy vision has not emerged in both entities so far. The jawboning about euro-bonds and pegging the Swiss franc to the euro are only making sentiment sour further. The EIA report which was released yesterday showed that the U.S commercial crude oil inventories increased by 4.2MM bbls from the previous week. At 354.0MM bbls, US crude oil stocks are above the upper limit of the average range for this time of year. Gasoline stockpiles decreased by 3.5MM bbls last week and are at the upper limit of the average range.


Petroleum Tech Talk
 
The intra-day bias in crude oil remain negative. As noted before, recovery from 75.71 is expected to be limited by 89.61, even though that mark is well past the 50% retracement of the 100.62-75.71 move. Below 84.40 momentum should gather in enough strength to challenge 75.71 again. A break there will resume whole decline from 114.83 towards 70 psychological level next. But a reversal which produces a sustained break of 89.61 will dampen this bearish view and turn focus back to 100.62 resistance instead. The current fall from 114.83 should now target next key cluster support at 64.23. At this point we will need to reassess considering the time of year.


Natural Gas
 
Prices bounced a bit on Wednesday, moving off the week's low as a storm approached production facilities in the Gulf. National Hurricane Center said earlier that a tropical wave over the Caribbean Sea has a 30% chance of becoming a cyclone in the next 48 hours. But gains were limited reflecting the diminution of Gulf production which now represents only 10% of the total. Moderating temperatures also helped rein in buyers, as well. Warmer than normal weather is only expected in the Southern states, while the Midwest and Northeast, the high consumption regions, were expected to see seasonably normal weather in the next two weeks. Participants will be primarily focused on EIA's report, later this morning, which is expected to show that stockpiles increased by 51 bcf, after adding 25 bcf in the preceding week.


Natural Gas Tech Talk  
 
The recovery from 3.855 should have run its course at 4.143 and intraday bias remains neutral until a new low below 3.855 is posted. A break there will confirm a resumption of the decline which projected from the 4.983 to 4.064 move and calculating from 4.612 targets3.692 next. On the upside, however, above 4.143 resistance will flip bias back to the upside and target 4.612 resistance instead. But until a new low is posted more medium term range trading could still be seen. In fact, a head and shoulders pattern is emerging with the head at recent highs and the neckline at about 3.905. A break there, on settlement could also bring about the tumble through familiar support at 3.60-3.80 that we have long anticipated.

source: KilduffReport.Com