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It is hard to believe, but even with the euro zone summit being deemed a success, all it took was a comment from a German Bundesbank official to set the market tone negative. Also, not to be out done, Moody's is also now reviewing the ratings of European sovereigns. So much for all that being over. To be fair, the ECB undertook considerable measures last week, and those efforts should enable stabilization of the financial sector in Europe. The group austerity coming Europe's way, however, will retard the zone's growth prospects for some time. As we have been noting, as well, China's economy appears to be slipping, and this s being seen in the outlook for Australia and Brazil. US coal exports, a big part of the current economic activity, may be affected as well. We continue to forecast a difficult 2012 on several fronts. China may turn out to be the biggest negative surprise of all.
 

Petroleum Markets     
   
Despite the strong surge on Friday, it was not enough to prevent a negative settlement for the week. The surprise build to stocks reported by EIA on Thursday were trumped by EU leaders' announcement of an agreement on future policies. It does not appear today however, that market participants are satisfied that the current state of affairs has significantly changed. A debt auction this morning in Italy has forced them to pay close to the 7% rate considered unsustainable. Holding prices from reaching new lows though are concerns over Iran. Calls by Iran to OPEC colleagues for a production cut imply Iran is indifferent to whatever Europe or the US decide. Ergo, sanctions look more and more likely, but an announcement of sanctions would spike prices high enough to exacerbate current economic struggles in both locales. With Europe's crisis far from solved, an upcoming election in the US and the onset of the Northern Hemisphere winter they are hardly imminent. The approach of the year end holidays will cause volume to fall after this week, with a consequent rise in already high volatility.


Petroleum Tech Talk   

The late surge on Friday, was rejected during the Asian and European sessions, so far. The inability to breach 100.00 makes that an even stronger psychological marker. Last week's low of 97.36 is minor resistance, which has not been breached today, so far. A fresh low will open the way for a challenge to 94.99 the low point from which the final leg to the recent high of 103.37 was launched. A break above that mark will change our bias to higher and make a challenge to the early June highs between 104.00 and 105. 00 a distinct possibility. Even though prices have rallied off today's lows, the inability to follow through on Friday's late buying, with fairly good volume to here, shows the market's inherent weakness.


Natural Gas       
   
The short term outlook for gas looks more and more negative. On top of another bearish stockpile report last Thursday, come more weather forecasts suggesting that real winter readings may not show up until later in the month, at the earliest. About the only supportive note was Baker Hughes reporting that rigs deployed to gas drilling dropped to a 23 month low. This will bear watching. As prices continue to fall, the pace of rig idling may increase as production is curtailed, and may give an indication that prices are bottoming. For the moment though the delay in heating demand is focusing traders' attention on brimming stockpiles which look to finish the season close to or surpassing previous records. This will become more apparent with each passing day, as the time remaining for demand inducing weather fades. There will be responsive spikes, on arctic blasts but as winter drones on these will pay increasing dividends as selling opportunities.


Natural Gas Tech Talk
               
Now that prices have officially breached our old target of 3.255, the way is open for a challenge to 3.00. There was a considerable gap between Friday's settlement and today's open of .064. with only a .o22 range so far ,do not be surprised to see attempts to fill it in. Bias remains for lower. A convincing settlement breach of 3.44 will be necessary to change that view. In such a case the way will be open to resistance at 3.77, and 3.987 beyond. Price action so far has been contained well below today's first support at 3.27, which will now be resistance. The market has extended its gap to the 13-day EMA, as well. All indications are currently overwhelmingly bearish, particularly with the opening of new lower ground, negating any oversold condition that may been building.

source: KilduffReport.Com