IntroView

The jobs number came in better than expected at +103,000, and markets have rallied on the data.  This will lend an air of vindication to those who assert that the economy is not as bad as many believe. The data was extolled as a declaration that the US is not in recession. That remains to be seen. However, record freight movements are occurring ahead of the holiday shopping season, according to Bloomberg. So, with no downward movement in the rate of unemployment and weekly claims remaining above 400k, today's rally may be fleeting.
 

Petroleum Markets      

Crude oil rose further yesterday as market bulls took solace from a falling dollar which lost ground to the euro as it appeared that policymakers were moving closer to aid to the region's troubled banks. Initial unemployment claims in the US rose less than expected last week which bolstered the previous day 's report that stockpiles were tightening. While EU officialdom seems to be drafting a plan for member states to coordinate a recapitalization of banks nothing has been finalized just yet. So far today oil prices have stayed in a tight range while participants await the release of the latest jobs report in the US. Currently, an increase of 30k to 115k is expected, well short of the 200k plus monthly job creation needed to indicate the economy is on a pace to replace the jobs lost consequent to the current economic malaise. With the market jumping off recent lows in a counter trend rally, traders are highly sensitive to news of any improvement in the economic picture. Add to that an element of seasonality, and a technically oversold condition and the stars were aligned for a bounce. In the end though it has to be about demand and the global economic engine is still sputtering.


Petroleum Tech Talk    

Crude oil continues its upward path off the recent low of 74.95. Yesterday's action reached to just below 83.00 and is set to define the upper limits of some coming consolidation, which is why we will stay neutral for the moment. If the jobs number today brings added momentum, the current counter-trend rally could turn into an actual reversal, but should be confined under last week's high of 84.77. On the upside, a break of 90.52 resistance is needed for a reversal confirmation. The move down from $115.00 should continue to our target of 64.00 or so. Prices have now moved over the 13-day EMA and are also well above today's pivot point of 80.15 and the weekly pivot point of 80.36, both of which are bullish. Overhead resistance at 83.61 and 83.97 should prove fairly stiff if a positive jobs number propels the market there. A poor number though could prompt shedding of length acquired this week.


Natural Gas  

     
Another notch lower was put up yesterday at 3.512. EIA reported that 97 bcf were injected to stocks; fairly close to our estimate of 99 bcf. It was enough to trim the inventory shortfall relative to last year which should shrink further in coming weeks as mild autumn weather presages larger subsequent builds. A sluggish economy, comfortable inventories and high gas production will keep the market oversupplied until significant heating load appears. Even when it does, gas production this year is expected to climb to an all-time high. So gas, like the markets for other basic commodities, is waiting for an improved economic picture which still may be some way off. However, this overwhelmingly bearish fundamental picture may be disrupted from time to time by brief oversold rebounds and seasonal influences.
 

Natural Gas Tech Talk            

Another notch lower was put up yesterday at 3.512. EIA reported that 97 bcf were injected to stocks; fairly close to our estimate of 99 bcf. It was enough to trim the inventory shortfall relative to last year which should shrink further in coming weeks as mild autumn weather presages larger subsequent builds. A sluggish economy, comfortable inventories and high gas production will keep the market oversupplied until significant heating load appears. Even when it does, gas production this year is expected to climb to an all-time high. So gas, like the markets for other basic commodities, is waiting for an improved economic picture which still may be some way off. However, this overwhelmingly bearish fundamental picture may be disrupted from time to time by brief oversold rebounds and seasonal influences.