IntroView
 
Markets are buoyant this morning, on the anticipation of regime change in Libya and for what lies ahead from the global central bankers. Beyond Libya, the focus is on various comments from European central bankers and leaders, Chancellor Merkel of Germany, in particular. She now only opposes issuance of a euro zone bond "for now." So, more liquidity is on the way. Gold is renewing its run toward $2000 per ounce, on its way to our year-end target of $2500. We point out that gold is the only currency or pseudo-currency that they cannot print more of, at will. Economic data points this week may further the recent negative sentiment, generally.
 

Petroleum Markets
    
The big story this morning is the turn of events in Libya. At this writing, apparently, rebels have seized the capital, Tripoli, have Qaddafi's sons in custody and are searching for the dictator, himself. The Colonel's 42-year-long rule has not permitted much organized opposition to arise, and so, they rebels have little experience of governance. Promises to consolidate gains and quickly returning the country's oil exports to market may be more problematic than pricing is currently envisioning by the narrowing of the Brent-WTI spread. More than anything though, directional cues have come from the reversal of the dollar versus the euro and yen. Macroeconomic considerations will be in the forefront again this week as market participants minutely parse anything out of the Fed's annual Jackson Hole, Wyoming, symposium, for clues to Bernanke's thinking about another round of QE. Unfortunately, after pledging to keep interest rates near zero for the next two years, the central bank does not have many bullets left.
 

Petroleum Tech Talk
 
Intraday bias in crude oil stays decidedly negative. The rejection of the 50% retracement, off the lows last week, has opened the possibility that fresh lows may be reached as early as today. A break there will resume the whole decline from 114.83 towards 70.00. There may be short, sharp rallies with the market quite oversold, but they should be contained by 89.00 which is now major resistance. There was a net fall in open interest over the Sept/Oct spread on solid volume showing more length being closed. Commitments report tonight should be interesting.


Natural Gas
 
As has often been the case, gas struggles at lows because oversold conditions rapidly build up. So even after hitting a contract and five month low of 3.843 after Thursday's EIA report, prices ended higher on Friday. An approaching storm in an oversold market also helped bulls overcome their recent inhibitions and prompted shorts to cover ahead of the weekend, despite moderating weather forecasts and comfortable supplies. The bulls got no help from Baker Hughes either, which reported Friday, that the gas rig count rose for the fifth time in six weeks, climbing to a six month high of 900. Even though there has been plenty of heat this summer to drive cooling demand, record production and almost 3 Tcf stored, should now limit upside to 4.00. Friday could only manage a 3.94 settlement, even after posting a 3.972 high.


Natural Gas Tech Talk  
 
The breach of the previous low at3.855 should open the road lower. But a head-and-shoulders pattern has emerged with the head at recent highs and the neckline at about the recent lows. This is rather unusual at market lows, where one would expect an inverse head and shoulders formation. A break there, on settlement could also bring about the tumble through familiar support at 3.60-3.80, that we have long anticipated. While decent interim support was seen in the 3.80 area, particularly with tropical activity picking up, a front month close below key support at the 2011 low of 3.731 from early March could drive prices into the 3.40s based on a swing measurement off the sell off from late July.

source: KilduffReport.Com