IntroView

The European leadership continues to work at righting the economic ship. The latest has the ECB looking to ease collateral requirements and extend loan tenors to two years in their announcement tomorrow, according to Bloomberg, in an exclusive report. Late yesterday, markets caught a lift off of a plan to extend the life of the ESFS and have it exist along side the upcoming ESM. That would get them close to their $1 billion wish amount that various leverage schemes have not allowed. But, playing the role of spoiler, the Germans have gone against that idea. No surprise. Finally, it appears the details of any plan agreed to on Friday will not be revealed until Sunday. Prices will be ebb and flow with the hope and disappointment of the emerging scheme, if any. As we keep saying, this is a political moment not likely to end in failure. As the markets reward the progress, participants are likely buying the rumor, in advance of selling the news. The plan's feasibility will immediately be called into question, and the likely treaty amendments will not be seen as assured, either. There is a mechanism for some nations to be left behind. It remains to be seen whether the spate of decent US economic data will be enough to maintain the bullish tone of the markets, once Cirque de Euro closes.
 

Petroleum Markets    
    
How often, in recent times, has a NYMEX session been contained within a $1.22 range? Not very often, hardly ever. This suggests that the market is holding its collective breath waiting for the Europeans, or inventories, or something. Despite a growing number of hopeful signs like consumer confidence, Black Friday results, Cyber-Monday sales or last night's API report, we have to agree with BP who said that prices above $100, put the very fragile recovery in peril. But there is also a very real danger that Iran's nuclear ambitions could blossom into a real problem whether its sanctions, or outright martial conflict. Whatever it is there is not much directional commitment. In the final analysis, it might just come down to holding long, waiting for the European decision, and selling out once it is released; the old traders saw of "buy the rumor, sell the fact."


Petroleum Tech Talk  
 
Prices were contained within a very narrow range yesterday, as they have been, so far today. Open interest continues to drop, even as the expiration migration is beginning. There was a net closing of positions from Thursday to Friday of over 10k lots. Both suggest weakness, but the market refuses to break the psychological marker of 100.00 in a meaningful way. These conflicting signs force us to keep our bias neutral until the previous high of 103.37 or 100.00 is breached, on settlement. Additionally, the momentum oscillator shows a bearish divergence. Today's pivot of 100.97 has been breached and first resistance comes in at 100.51, which has not been. A cautious long may work somewhere between the two but with a very close stop.


Natural Gas      
   
Prices pressed lower by the weather pressed technical markers before recovering. NWS predicts persistent above-normal temperatures in the high consumption regions for the next two weeks. Supply and overproduction, particularly from shale will continue to hold any price advance in check until the the mercury drops. Weekly injections to stockpiles persisted much longer than usual. Last week saw the first withdrawal of the season, and it was only for 1 bcf. This will be the third straight year that stockpiles start winter at record levels. Production at current levels could add an additional 400 bcf over the winter and even if the rest of the winter has a close to normal weather pattern, at season's end, stocks will be well above historical norms. But if prices drop towards 3.00, production may start to be trimmed considerably.


Natural Gas Tech Talk
               
Prices pressed below our stop loss level of 3.44, but recovered before settlement at 3.487, so we have to remain neutral and assume that the recovery off recent lows is still underway. Even though 3.44 was breached , we will need to see a settlement below to declare that another test of 3.285 is underway with a renewed target of 3.255. Upside resistance remains at 3.77, which will target 4.00 and change bias back to higher. A downside break of the 3.255 target should bring 3.00 under assault quickly, but given the time of year the probability is low, and drops every session that it does not occur. A cautious long may not be imprudent but it should be stopped very, very quickly.

source: KilduffReport.Com