IntroView

As we grind toward the weekend, the developments out of  Europe continue apace. Late yesterday, a London newspaper reported that France and Germany had agreed to go all in and expand the ESFS to 2 trillion euro. The story lacked details, and competitor Dow Jones got euro zone officialdom to deny the report. Still, the market seems to believe that something is afoot given the extended rally. Minor headlines from various players seem to indicate there is progress; however, the latest is that center-right German parliment members are a stumbling block, and France's Sarkozy is preparing to go to Germany today to sort out the objections. He is also committed to additional measures to maintain France's AAA rating. So, the world continues to turn on the euro zone. Like many long-run soap operas, let's hope this saga moves to the obscurity of webisodes soon.
 

Petroleum Markets        

Crude oil futures dipped in the early going yesterday, for a second session, focusing on China's Q3 economic growth, which came in weaker than expected, posting a two-year low and stoking worries about oil demand. Later however, the market reversed upwards by encouraging US corporate earnings. After the close of the open-outcry session, news hit the tape that there was an agreement to expand the EFSF to $3Tn Euro, after which the day's highs were posted. Why this was so welcomed, we do not know as it can only mean burgeoning public sector debt and attendant low growth rates. Additionally, this can only mean that China, which one commentator yesterday characterized as "The engine for global economic growth", will have even slower slower growth as their export driven economy derives 40% of its GDP from European exports. Even if political leadership come up with a "comprehensive" plan to contain the globe's current economic/financial maladies, they will be difficult to implement, and will lead to slow growth and high unemployment for decades. How is that good for energy demand growth?


Petroleum Tech Talk    

Even though the technical picture points higher, the narrow range overnight and lower volume says to us that there is little conviction and bulls are losing control. Near term resistance is close at last month's 90.52 high. In fact, 38.2% retracement of 114.83 to 74.95 is 90.18. We will keep our bias neutral until that is violated. There is support today at 87.84, followed by 85.22, but we will need to see a settlement below last week's low of 83.17 to confirm that the decline to our target of mid-60s has resumed. A settlement break above 90.18-90.52 area will suggest that a move to take out 100.62 resistance is underway.


Natural Gas         

Expectations for another potential triple digit build to stockpiles have diverted participants' focus from market technical factors and drove prices lower for a second session yesterday. Most estimates hold that stocks will peak just below or at last year's record of 3.84 Tcf, before winter withdrawals begin. Estimates run up to over 130 bcf, while we think the report will show that 118 bcf was injected. Weather reports that displayed a cooling trend were moderated somewhat, as well, with temperatures in the Northeast to cool to normal or slightly below normal later this week and early next week, while below-seasonal Midwest readings will moderate to near seasonal by Sunday or Monday. Until colder weather stirs more heating load upward momentum will be difficult to sustain. However we remind again that this is the time for seasonal lows to be posted and even given the market's structural difficulties lower lows will be equally difficult until technical markers are violated.


Natural Gas Tech Talk    
            
Even though prices backed away from 3.64, and the nearby contract has lost 4.1% in the last two sessions, the biggest two-day slide in a month, there wasn't enough momentum to post another new low, either. We will flip our bias back to neutral then until there is another settlement above or below recent highs or lows. Holding 3.446 should represent a short term bottom and another rise would remain in favor. Above 3.777 will target 3.853 and above. Upside should be limited below 4.143 resistance (61.8% retracement of 4.612 to 3.446 at 4.167) and bring decline resumption. Break of 3.446 will target 3.255 key support level next.

source: KilduffReport.Com