IntroView

The past two trading sessions have seen considerable deterioration into the afternoon (New York) close. It is as if the markets hold on to as much optimism they can muster, and then reality sets in. This morning is no different: on the heels of the German Parliament approving an expanded EFSF, we have markets rallying, mildly, on renewed hopes for the euro zone bailout. Yesterday, the US weekly petroleum inventory showed a considerable decline in refined product demand, a harbinger of the slowing economy and dismal employment picture. Ben Bernanke is on the wires calling US unemployment, "a national crisis," signaling more easing measures of all stripes. With these remarks, it is likely that gold will catch a bid again, especially since raised margin requirements were behind some of the selling. The move toward this store of value will resume. We await the weekly jobless claims, later today - another 420k+ reading will virtually assure a near-zero reading for the big number next Friday.

 
Petroleum Markets   

Crude oil continues to fluctuate wildly over the same ground as the sentiment pendulum swings between confidence and pessimism over whether or not the global economy is headed for recession. The focus today will be on the German Parliament which is deciding on its contribution to the EFSF and how big a haircut its banks will have to take. The unexpected rise in German inflation may also make it more complicated for the ECB to implement easing measures next week. Data from the US weighed negatively on crude oil, as well. EIA showed a larger than expected build to stocks suggesting weakening demand for crude. and durable goods orders contracted 0.1% m/m in August after rising 4.0% a month ago. Investors are casting about for any sign that suggest containment of the deepening debt crisis that affects growth. Volatility will set the tone as participants await data from the euro zone, the German vote and US GDP results.


Petroleum Tech Talk  

Both yesterday's move lower and Monday's rally produced only tepid volume, suggesting players are moving to the sidelines waiting to jump in. Usually session ranges pushing $4.00 are also accompanied by noticeable changes in open interest and that has been absent, as well. Today's rise then suggests that the recovery from 77.11 temporary low might extend further, although our bias will remain for more downside though until 90.52 resistance breaks. The decline from 114.83 should resume and a break below 77.11 should send crude oil through 75.71 support to the 70.00 psychological level next. However, a break of 90.52 resistance, on settlement, would invalidate this view. The market remains below the EMA on daily, weekly and monthly charts and shows the market's inherent weakness.


Natural Gas   

Gas turned lower again yesterday after rising for two consecutive sessions as expectations for another large injection to stocks and continued mild weather were featured. We think EIA will report a 96 bcf build to stocks, later this morning, narrowing gap to last year. The deficit should close more in subsequent reports as milder autumn weather continues to limit demand. At present there are no immediate storm threats to Gulf of Mexico gas producing platforms or pipelines, either. So, with seasonal demand declining, production at record highs and a still struggling economy likely to curb industrial usage, expectations for the upside remain limited without colder weather to initiate more heating load. But gas often sets a seasonal bottom at this time of year, a phenomenon that should not be ignored, especially without fresh low prints, and with participants focusing ahead to the peak demand winter heating season.


Natural Gas Tech Talk          
 
Despite last week's front-month slide to an 11-month low of 3.662, the market will continue to be viewed as range bound until 3.70 is broken on settlement. Similarly, on the upside a breach of 4.15 will be required to flip the bias to higher. But with 3.859 minor resistance intact, near term outlook remains bearish and the decline should continue to our target of 3.255 key support. However, break of that mark may signal a short term bottoming and will turn focus back to 4.00, and beyond to 4.15 key resistance. Prices are still below the 13-day EMA and price action, so far today, is under the pivot of 3.819, both of which suggest lower.

source: KilduffReport.Com