IntroView

The markets are mostly positive this morning, despite a Moody's downgrade of two French Banks, Societe Generale and Credit Agricole. France's BNP was spared for now; it remains on review. Austerity in Europe took another step forward with the confidence vote secured by Italy's Berlusconi. We are now to await a conference call among Germany, France, and Greece, later today, to find out how that debacle moves forward. And, it is, apparently true that China has offered to bail out Europe. The terms: early full admission to the World Trade Organization. At least, they did not ask for bases in within the continent, but the implications are obvious. One thing is clear, the markets seemingly want to go higher, and, to the extent the euro fires diminsh, the upward trajectory will continue -- until the next hiccup, which could come in the form of the next disappointing economic data set. Big Republican wins spell a "no-go" for President Obama plans to pay for his stimulus with taxes on high income earners. So, there will be more on that to come.
 

Petroleum Markets

Crude oil recovered from losses made in the Asian session, helped by gains in European stocks. Still, short term gains must be viewed skeptically given that underlying economic fundamentals continue to deteriorate. The ECB said that it will lend $575M to 2 banks in a 7-day USD funding suggesting that credit markets are beginning to seize. The IEA and the OPEC also released their latest global oil demand forecasts. Given intensifying concerns over the macroeconomic outlook, both agencies revised lower their estimates for 2011 and 2012. However, API reported that crude stockpile plunged -5.1MM/bbls to 344.16MM/bbls in the week ended September 9. Gasoline and distillate storages however, rose 2.8MM/bbls and 67k/bbls respectively. Expectations for EIA results are for a build to crude stocks so this offset will lead to more confusion as to a directional cue. We will keep the bias at neutral until trading over 90.00 is sustained.


Petroleum Tech Talk

Crude oil's choppy recovery from 75.71 is still in progress and with 83.20 minor support intact, another new high for the move yesterday shows a gathering strength and a further rise could still be seen as such consolidation extends. At this point, we'd still expect upside to be limited below 100.62 resistance and bring resumption of fall from 114.83 eventually. Below 83.20 minor support will flip bias back to the downside for retesting 75.71 low first. A break of 100.62 resistance though will indicate that fall from 114.83 has completed.


Natural Gas  

Prices moved towards the higher end of the recent range yesterday in inconclusive prices action as technicals were the feature. This leads us to believe that the bottoming formation that seemed to be building is now starting to control sentiment. Some cool Midwest weather later this week could stir heating load, but any burst in demand should be was short-lived. With summer winding down, production at record highs and demand sagging in a weak economy, the open interest has become saturated with short positions. Additionally, there are no imminent storm threats now to Gulf of Mexico oil and gas producing facilities. There is every reason for the market to be breaking down, yet is not. We will reserve judgement though until the recent high is taken out.


Natural Gas Tech Talk    
 
Natural gas continues to stay in range of 3.78/4.13 as consolidations continue. Intraday bias remains neutral and more sideways price action could be seen. But the market is now above the 13-day EMA. Below 3.78 will resume the fall from 4.983 towards the 3.255 low next. On the upside, however, break of 4.13 resistance will in turn argue that fall from 4.983 is over and stronger rebound should then be seen to 4.612 and above. If a reversal is at hand we need to see two things: First, a settlement above 4.00 and a settlement above 4.13 for confirmation. Until then we continue to favor another fall, eventually to 3.255 and below, and so will keep the bias neutral for the moment.

source: KilduffReport.Com