Crude Oil Market Commentary For Wednesday Evening

Crude oil closed lower on Wednesday as prices fell to a seven session low Wednesday due to a sharp rise in U.S. crude inventories and on a stronger dollar. The U.S. Energy Information Administration reported a 7.25 million barrel increase in crude inventories for last week, which was significantly more than the 1.4 million barrel gain that analysts had been expecting. The mid range close sets the stage for a steady opening on Thursday. Stochastics and the RSI remain bearish signaling that a short term top is in or is near. Closes below last Monday's low crossing at 79.41 are needed to confirm that a short term top has been posted. If May renews the rally off February's low, January's high crossing at 85.43 is the next upside target. First resistance is the reaction high crossing at 83.47. Second resistance is January's high crossing at 85.43. First support is Monday's low crossing at 80.89. Second support is Monday's low crossing at 78.86.

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Natural gas closed lower on Wednesday as it extends the trading range of the past four days. The low range close sets the stage for a steady to lower opening on Thursday. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If May extends this winter's decline, weekly support crossing at 4.035 is the next downside target. Closes above the 20 day moving average crossing at 4.511 are needed to confirm that a low has been posted. First resistance is the 10 day moving average crossing at 4.308. Second resistance is the 20 day moving average crossing at 4.511. First support is Monday's low crossing at 4.093. Second support is weekly support crossing at 4.035.

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The U.S. Dollar closed sharply higher on Wednesday as worries over sovereign debt in Europe triggered today's rally. The high range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near term. If June extends last week's rally, the May 2009 high on the weekly continuation chart crossing at 83.34 is the next upside target. Closes below the 10 day moving average crossing at 80.65 would confirm that a short term top has been posted. First resistance is today's high crossing at 82.19. Second resistance is the May 2009 high on the weekly continuation chart crossing at 83.34. First support is the 20 day moving average crossing at 80.73. Second support is the 10 day moving average crossing at 80.65.

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Phil Flynn: Oil Bull Knockdown

Oil bulls got a shot to the solar plexus from the American Petroleum Institute but it may be a downgrade from Fitch rating services that delivers the knockout blow. The American Petroleum Institute blindsided the global oil markets last night by reporting a spectacular 7.5 million barrel weekly build in US crude oil supplies. The oil seemed to come out of nowhere and made the oil bulls get nervous but the bulls vowed to wait for what the Department of Energy might say today.

Will it really matter if another PIG goes down? Overnight the euro got hammered and the dollar soared on news that Fitch Ratings, as reported by Marketwatch, downgraded Portugal's long term foreign and local currency issuer default ratings to AA- from AA on Wednesday. Fitch said that the outlooks on the long term IDRs are negative and the downgrade reflects significant budgetary underperformance in 2009. Marketwatch quotes Douglas Renwick, associate director in Fitch's Sovereign team as saying, “A sizeable fiscal shock against a backdrop of relative macroeconomic and structural weaknesses has reduced Portugal's creditworthiness.

Talking about sizable shocks how about that crude drop! It seems that some of those import drops into the North East due top that freaky winter storm self corrected along with the stormy seas. Oil imports rebounded from surprise drops in California and the Northeast. The API said that crude Imports were up by 1.3 million barrels a day to a hefty 9.19 million barrels.

The API reported that gasoline supplies fell by 81,000 barrels with increased demand and refinery turnarounds helped supply fall. Distillates fell as refiners are focused on turnarounds and maxing out on more profitable gas. Mark Shenk of Bloomberg News points out those higher profits for making gasoline are prompting refiners to increase motor fuel production to a record for this time of year. Mr. Shenk points rose 2.3 percent to 8.96 million barrels of oil a day. That is the highest level since they began to keep records all the way back in 1983. Mr. Shenk says this was inspired by the fact that the crack spread has almost doubled to $13 this year. Demand is also rising! Barbara Powell of Bloomberg says that MasterCard Spending Pulse reported that U.S. gasoline consumption rose last week to the highest level since June, the fourth increase in five weeks.

Motorists bought an average 9.66 million barrels of gasoline a day in the week ended March 19, the second biggest credit card company said in its SpendingPulse report. Consumption was up 1.4 percent from the previous week and 1.8 percent above a year earlier. Demand for the past four weeks averaged 9.55 million barrels a day, the highest level since the week ended July 3 and 2.5 percent above the same period in 2009. Total fuel demand year to date is up 1.5 percent from the same period of 2009.

OPEC put off their September OPEC meeting till October because of Ramadan. That means another 30 days of cheating on production! Yippe!. Once again the market will focus on the dollar and the euro. The market's worst fear is that the crisis in Greece will spread to other PIIG nations (Portugal, Italy Ireland and of course Greece). That has put the market out of its comfort zone of being short the dollar and long the euro and of course being long crude oil. If more PIIGS start to fall then so too will oil. Forget about China demand for the moment and focus on what is really moving the market.

Phil Flynn can be reached at pflynn@pfgbest.com And don't forget to watch Phil every day on the Fox Business Network.

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Crude Oil Drops as Report Shows U.S. Supplies Gained More Than Predicted

Crude oil fell after a government report showed a bigger than forecast increase in U.S. supplies and as the dollar surged to a 10 month high against the euro. Stockpiles rose 7.25 million barrels to 351.3 million last week, the Energy Department said. Inventories were forecast to climb 1.65 million barrels, according to a Bloomberg News survey. The greenback increased after Fitch Ratings cut Portugal’s credit grade. A stronger dollar reduces the appeal of commodities as an alternative investment.

“The crude number was a lot bigger than what was expected,” said Tom Bentz, a broker at BNP Paribas Commodity Futures Inc. in New York. “There hasn’t been much attention paid to the fundamentals lately. The market has been more focused on what happens to the dollar and equities.” Crude oil for May delivery dropped $1.04, or 1.3 percent, to $80.87 a barrel at 11:01 a.m. on the New York Mercantile Exchange. Futures have increased 1.9 percent in 2010 and 50 percent from a year earlier.

Imports of crude oil gained 12 percent to 9.4 million barrels a day last week, the highest level since September and the biggest change since August, the report showed. Gasoline stockpiles fell 2.72 million barrels to 224.6 million in the week ended March 19. A 1.5-million-barrel drop was forecast, according to the median of 16 analyst responses in the Bloomberg News survey. Inventories of distillate fuel, a category that includes heating oil and diesel, declined 2.42 million barrels to 145.7 million, according to the department. A decrease of 985,000 barrels was forecast.....Read the entire article.

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Crude Oil Daily Technical Outlook Wednesday Morning

Crude oil's rebound failed below 83.16 and the sharp retreat dragged 4 hours MACD back below signal line. Consolidations from 83.16 might extend further and intraday bias is turned neutral. Nevertheless, in case of deeper fall, we'd still expect strong support from 38.2% retracement of 69.50 to 83.16 at 77.94 and bring rally resumption. Break of 83.16 will target a retest of 83.95 high. However, note that sustained trading below 77.94 fibo level will argue that rise from 69.50 is completed and deeper fall would possibly be seen to retest this support.

In the bigger picture, crude oil is still trading well inside medium term rising channel and the rise from 33.2 might still be in progress. Nevertheless, as such rise from 33.2 is treated as a correction to whole decline from 147.27 only, even in case of another high above 83.95, we'd continue to expect strong resistance near to 50% retracement of 147.27 to 33.2 at 90.24 to bring reversal. On the downside, though, break of 69.50 support will now indicate that crude oil has topped out in medium term already and turn outlook bearish.....Nymex Crude Oil Continuous Contract 4 Hours Chart

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Where is Crude Oil Headed on Wednesday?

CNBC's Bertha Coombs discusses the day's activity in the commodities markets, and looks ahead to where oil is likely headed tomorrow.




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Crude Oil Market Commentary For Tuesday Evening

Crude oil closed higher due to a late day short covering rally on Tuesday. The high range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI are bearish signaling that a short term top is in or is near. Closes below last Monday's low crossing at 79.41 are needed to confirm that a short term top has been posted. If May renews the rally off February's low, January's high crossing at 85.43 is the next upside target. First resistance is the reaction high crossing at 83.47. Second resistance is January's high crossing at 85.43. First support is Monday's low crossing at 80.89. Second support is Monday's low crossing at 78.86.

Natural gas closed higher due to short covering on Tuesday as it consolidates some of this winter's decline. The high range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If May extends this winter's decline, weekly support crossing at 4.035 is the next downside target. Closes above the 20 day moving average crossing at 4.550 are needed to confirm that a low has been posted. First resistance is the 10 day moving average crossing at 4.357. Second resistance is the 20 day moving average crossing at 4.550. First support is Monday's low crossing at 4.093. Second support is weekly support crossing at 4.035.

The U.S. Dollar closed higher on Tuesday as it extends last week's breakout above the 20 day moving average crossing at 80.69. The high range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near term. If June extends last week's rally, February's high crossing at 81.70 is the next upside target. If June renews this month's decline, the 38% retracement level of the November-February rally crossing at 79.17 is the next downside target. First resistance is Monday's high crossing at 81.35. Second resistance is February's high crossing at 81.70. First support is the 20 day moving average crossing at 80.69. Second support is the 10 day moving average crossing at 80.51.

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Phil Flynn: Jean Claude Trichet to Save the Day!

Wild ranges and a lot of action!

After it was all said and done, we basically ended up where we started. Oil prices were once again just a pawn of the foreign exchange market as the EURO started the day absolutely getting crushed over the Greek debt crisis. The Financial Times points out that the Euro hit the lowest level against the Swiss franc since the Euro came into existence in 1999. The Wall Street Journal said that the euro started the trading day on a weak footing after German Chancellor Angela Merkel ruled out discussion of an aid package for Greece when European leaders gather at a meeting scheduled for Thursday and Friday. The currency dropped as low as $1.3463 after Greece Deputy Prime Minister Theodore Pangalos warned that the integrity of the euro zone could suffer should EU leaders fail to support Greece. The dollar became safe haven fodder and the commodities got hammered.

It looked like the risk trade was getting ready to collapse before European Central Bank Chairman Jean Claude Trichet stepped in to save the day. Well at the very least he stepped in to save the Euro.
Jean Claude said that Greece was courageous. Did he say courageous? Yep, that's what he said. Dow Jones reported that austerity measures adopted by the Greek government to slash its budget deficit are "convincing and courageous. Participants in financial markets will eventually recognize this as well, said Trichet, who repeated that the notion of a country leaving the euro zone was absurd. The single currency is not a la carte, "We share a destiny in common." Well market participants seemed pleased and the euro reversed course. That brought the oil back as well reversing its earlier sharp gains adding more excitement to the expiration to the April crude futures. For bulls and bears, the moves can be maddening unless you realize that oil is just in a range. I have been saying for months that oil is in a big trading range and will eventually break out on the downside. Yet as the outlook for US interest rate being still in that low for an extended period language the range goes on.

It appears that I am not the only one who feels this way. Dow Jones Newswires reports that The International Energy Agency said, “Oil price risks are skewed toward the downside, but prices will most likely drift in their recent range for the rest of the year", quoting International Energy Agency Deputy Executive Director Richard Jones. He said that the price outlook hinges on oil demand growth and, "our prognosis is that there won't be many." But eventually, in the next three to four years, new oil production, particularly from Brazil and West Africa, will weigh on prices. As far as that production goes Dow Jones says that, “The first of three floating production, storage and offloading vessels is due to start producing from Ghana's 700 million barrels of oil equivalent Jubilee field before the end this year at a maximum capacity of 120,000 barrels a day", Tullow Oil PLC's (TLW.LN) Chief Operating Officer Paul McDade said earlier this month.

Brazil's Tupi field holds an estimated 5 billion to 8 billion barrels of recoverable reserves. The initial development phase is expected to commence in late 2010, with initial production of up to 100 000 barrels a day, BG Group, which has a 25% share of Tupi, said on its Web site. Jones told Dow that a recovery in U.S. oil demand so far hasn't been strong. While there have been some encouraging signs of growth, energy intensity per GDP unit in the U.S. have dropped. Growth may not come back as strong as it was prior to the economic downturn, Jones said.

Instead of cursing the trading range, just play it! Buying oil or selling oil at the extreme ranges of the daily charts has been very profitable. Try to take into account volatility as well as the fundamental outlook and adjust accordingly. Yesterday could have been a banner day yet if you are stubborn with a bullish or bearish ideology you may be missing the boat.

You can contact analyst Phil Flynn at pflynn@pfgbest.com You can also see Phil on Fox Business Network every day.

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Crude Oil Declines on Forecast for Higher U.S. Supplies, Stronger Dollar

Crude oil fluctuated as the Standard & Poor’s 500 Index erased gains and the dollar increased against the euro. Oil climbed as much as 0.7 percent earlier today when the S&P 500 advanced above its March 17 close, the highest in 18 months. Futures dropped earlier when the greenback appreciated on skepticism European Union leaders will agree on an aid package for Greece this week. A stronger dollar reduces the investment appeal of commodities.

“All we are doing is chasing the S&P,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “Traders have been trained to look at the correlation between the S&P and oil.” Crude oil for May delivery rose 6 cents to $81.66 a barrel at 11:15 a.m. on the New York Mercantile Exchange. Prices are up 2.9 percent this year. The S&P 500 declined 0.13 point to 1,165.68, after climbing as much as 3.61 points, or 0.3 percent, to 1,169.42.

The dollar traded at $1.3537 per euro, up 0.2 percent from $1.3558 yesterday. The greenback was up 0.6 percent earlier today. The euro weakened versus 12 of 16 major counterparts after European Central Bank President Jean-Claude Trichet spoke out against offering low interest loans to Greece.

Oil prices have remained within a $68 to $84 a barrel range since October, and have traded between $77.05 and $83.16 over the past month. “We’re finding out the market can’t move too far above $80 before running into resistance,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “There will have to be evidence of increasing demand or a geopolitical crisis to push prices above $83”.....Read the entire article.


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Crude Oil Daily Technical Outlook For Tuesday

Crude oil rebounds strongly after dipping to 78.57 and the break of 80.94 minor resistance argues that consolidation from 83.16 is possibly completed at 78.57 already. Intraday bias is flipped back to the upside for retesting 83.16 first, break will confirm rally resumption to retest 83.95 high. In case of another fall, downside is still expected to be contained by 38.2% retracement of 69.50 to 83.16 at 77.94. However, note that sustained trading below 77.94 fibo level will argue that rise from 69.50 is completed and deeper fall would possibly be seen to retest this support.

In the bigger picture, crude oil is still trading well inside medium term rising channel and the rise from 33.2 might still be in progress. Nevertheless, as such rise from 33.2 is treated as a correction to whole decline from 147.27 only, even in case of another high above 83.95, we'd continue to expect strong resistance near to 50% retracement of 147.27 to 33.2 at 90.24 to bring reversal. On the downside, though, break of 69.50 support will now indicate that crude oil has topped out in medium term already and turn outlook bearish.....Nymex Crude Oil Continuous Contract 4 Hours Chart.

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Crude Oil Market Commentary For Monday Evening

Crude oil closed higher due to a late day short covering rally on Monday. The high range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI are diverging and are turning neutral to bearish signaling that a short term top is in or is near. Closes below last Monday's low crossing at 79.41 are needed to confirm that a short term top has been posted. If May renews the rally off February's low, January's high crossing at 85.43 is the next upside target. First resistance is the reaction high crossing at 83.47. Second resistance is January's high crossing at 85.43. First support is Monday's low crossing at 80.89. Second support is today's low crossing at 78.86.

Natural gas closed lower on Monday as it extends this winter's decline below weekly support crossing at 4.157. The mid range close sets the stage for a steady opening on Tuesday. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If May extends this winter's decline, weekly support crossing at 4.035 is the next downside target. Closes above the 20 day moving average crossing at 4.585 are needed to confirm that a low has been posted. First resistance is the 10 day moving average crossing at 4.396. Second resistance is the 20 day moving average crossing at 4.585. First support is today's low crossing at 4.093. Second support is weekly support crossing at 4.035.

The U.S. Dollar closed lower due to profit taking on Monday but remains above the 20 day moving average crossing at 80.70. The low range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI have turned bullish signaling that sideways to higher prices are possible near term. If June extends last week's rally, February's high crossing at 81.70 is the next upside target. If June renews this month's decline, the 38% retracement level of the November-February rally crossing at 79.17 is the next downside target. First resistance is today's high crossing at 81.35. Second resistance is February's high crossing at 81.70. First support is the 20 day moving average crossing at 80.70. Second support is the 10 day moving average crossing at 80.49.


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U.S. Government Agency Exposes Faults in Key Oil Report

The U.S. government faces "critical" shortcomings in producing its oil inventory data, according to internal Department of Energy documents, casting doubt on figures that affect the production and prices of the world's most important industrial commodity.

The documents, obtained through a Freedom of Information Act request, expose several errors in the Energy Information Agency's weekly oil report, including one in September that was large enough to cause a jump in oil prices, and a litany of problems with its data collection, including the use of ancient technology and out of date methodology, that make it nearly impossible for staff to detect errors. A weak security system also leaves the data open to being hacked or leaked, the documents show.

Moreover, problems with EIA data underscore the hazards of depending on companies or other firms to self report data.

Internal emails and a report from a consulting firm prepared in September describe a process at the EIA that served the oil world well in 1983, the first year that oil futures traded, but hasn't kept up as the inventory data have become more influential and the nation's oil infrastructure has become more complex.

The EIA has been producing the data on oil and fuel inventories since the early 1980s, and the release of the report each Wednesday at 10:30 a.m. is a major event for oil markets. The division collects data from thousands of facilities, all reporting the number of barrels held in storage around the nation. But many of its systems haven't been updated for 30 years, and much of the data input is done manually, according to one report commissioned for the EIA, prepared by consultants SAIC Inc. The consulting group directed questions to the EIA.....Read More


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Crude Oil Drops to Lowest Price in Almost Three Weeks as Dollar Advances

Crude oil fluctuated as the dollar weakened, increasing the appeal of commodities as an alternative investment, and gasoline fell. Oil erased earlier declines after European Central Bank President Jean-Claude Trichet said he doesn’t expect further downgrades of Greece’s credit ratings, reducing the value of the dollar. Gasoline prices fell 0.5 percent.

“Crude is responding more to movements in the foreign exchange markets than anything else,” said Jason Schenker, president of energy consultants Prestige Economics in Austin, Texas. Crude oil for April delivery rose 17 cents to $80.85 a barrel at 12:37 p.m. on the New York Mercantile Exchange. Earlier, it touched $78.57, the lowest price since March 2. Futures have climbed 50 percent in the past year.

April futures expire at the close of Nymex floor trading today. The more active May contract gained 18 cents to $81.15 a barrel. Oil dropped as much as 2.6 percent earlier today and the U.S. currency rose to the highest level since March 2 after German Chancellor Angela Merkel said investors shouldn’t expect a European Union summit this week to agree on aid for Greece.

The dollar weakened 0.2 percent against the euro to $1.3556 from $1.3530 March 19. Earlier, it touched $1.3464. The currency has strengthened 1.5 percent since March 12. “When the dollar’s strong, the bears in the oil market come out,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The oil markets had a second test last week of $83 and failed to break through, so they’ve peeled back”.....Read the entire article.

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Weekly Gold, Silver, Crude Oil & Natural Gas Analysis

From guest analyst Chris Vermeulen....

Last week was nothing special as stock market continued to drift higher on light volume and the Volatility Index (VIX) reaching a new multi year low. This mix of higher prices on light volume, multi year lows in the VIX and an overbought market paints a clear picture to a market technician – Be Ready for a Pullback!

Last Wednesday we posted Chris' report covering sector rotation comparing the price performance of these sectors from the January peak with last weeks price action. It was very interesting and it pointed to a sharp sell off Thursday or Friday.

Just click here if you would like to see the post.

GLD Gold ETF Daily & 60 Minute Chart

Last week gold gap higher then traded sideways for a few days. I will admit it was very tempting to buy into the move but I stuck with my trading strategy which is to not chase moves which gap in my direction.

Gaps are known to get filled about 70% of the time. What that means in this situation is that the price will most likely sell back down to fill that gap before trying to move higher.

All that said the problem I see now on the daily chart is the possibility of the mini Head & Shoulders pattern breaking down. If gold moves any lower then I would expect a sharp pullback. The measured move would equal a pullback to the $104 area on the GLD chart and the $1070 level for spot gold.



SLV Silver ETF Trading Chart

The silver chart looks much different than gold’s but in reality they are trading in a similar situation. If silver moves any lower then sellers will flood the market and take the price down to the next support level. But if we get a bounce then it should surge and rally almost a $1 per ounce from this point.

Only time will tell as we let this trade unfold with a stop at $16.52.



Natural Gas – Weekly Trading Chart

Natural gas has been selling down for almost 2 months. The chart is starting to show a possible buy point if all goes well in the next few weeks.

What I like about this chart is that we saw a break of a support level and heavy selling which tells me the general herd is getting shaken of their long positions. This extended sell off is now entering a support zone and could provide us with a low risk setup in the next 2-3 weeks.



Crude Oil – Weekly Trading Chart

Oil is trading similar to gold and silver. It is trading at a key pivot point and could go either way quickly. I will be keeping my eye on the daily and 60 minute charts for a possible low risk entry point.



Weekend Stock & Commodity Trading Conclusion:

In short, the overall market is trading at level were there is not much to we can do. Day traders are able to take advantage of this price action but not swing traders.

I feel the major indexes have another 1-2 down day left in them before a bounce, but it’s more difficult to gauge the momentum with a cool down period in the middle of it all (the weekend).

The market is on the edge of some exciting moves as I can feel something brewing. With any luck there could be some great opportunities in the coming days.

Just click here if you would like to receive Chris Vermeulen's Free Weekly Trading Reports.


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Crude Oil Weekly Technical Outlook

Crude oil failed to take out 83.16 resistance last week and subsequent sharp fall is inline with our view that more consolidation would be seen. Initial bias is mildly on the downside this week for 38.2% retracement of 69.50 to 83.16 at 77.94. But downside should be contained there and bring resumption of rally from 69.50. Break of 83.16 will target 83.95 high. However, note that sustained trading below 77.94 will argue that rise from 69.50 is completed and deeper fall would possibly be seen to retest this support.

In the bigger picture, crude oil is still trading well inside medium term rising channel and the rise from 33.2 might still be in progress. Nevertheless, as such rise from 33.2 is treated as a correction to whole decline from 147.27 only, even in case of another high above 83.95, we'd continue to expect strong resistance near to 50% retracement of 147.27 to 33.2 at 90.24 to bring reversal. On the downside, though, break of 69.50 support will now indicate that crude oil has topped out in medium term already and turn outlook bearish.

In the long term picture, there is no change in the view that fall from 147.27 is part of the correction to the five wave sequence from 98 low of 10.65. While the rebound from 33.2 is strong and might continue, there is no solid evidence that suggest fall 147.27 is completed and we're still preferring the case that rebound from 33.2 is merely a corrective rise only. Having said that, strong resistance should be seen between 76.77/90.24 fibo resistance zone and bring reversal for another low below 33.2 before completing the whole correction from 147.27.....Nymex Crude Oil Continuous Contract 4 Hours Chart.

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Where is Crude Oil Headed Next Week?

CNBC's Sharon Epperson discusses the day's activity in the commodities markets, and looks ahead to where oil is likely headed next week.




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Phil Flynn: Greece the Skids

Greece the skids? Hey wait a minute, I thought the Greece debt cries was solved. Didn't we think that when S&P reaffirmed Greece’s debt rating and took them off the dreaded credit watch that ll was well? Silly me, or is it the silly markets that just want to sweep away the reality of any debt crisis and want desperately to believe that all is well in Greece and the rest of Europe. It was just last Tuesday when the Euro soared above 133770 and investors ran away from the dollar in an environment where interest rates are at zero for an extended period. Now after just a few words from Greek Prime Minster George Papandreou all of a sudden the dollar does not look half bad and the Euro has fallen near 13580. Mr. Papandreou basically threatened the EU and warned that If Greece could not sell its bonds and the EU would not come to his rescue, they may have to go to the International Monetary Fund and get some help. Take that Germany! Well believe it or not it kind of worked as Germany said maybe they were open to helping Greece out their debt ridden embarrassing situation with the IMF’s help. All of this Greek tragedy can really undermine the confidence in the Euro.


It also shakes the confidence of the oil bulls that are very dependent on a strong Euro, or at least a weak dollar, to keep their seasonally inspired ill fated bull drive alive. The oil bulls, who have own this market for about one month, need to take this thing to the next level shortly considering the state of the weak fundamental backdrop in crude oil. And yes I know all about China, blah, blah, blah yet the risks to China oil demand are rising each day. Oil is still in a range and will look very weak if it fails to make a stand and if it doesn't, look for it to come down hard.


And yes I know this is “The Energy Report” and not a foreign exchange report, but let’s face it what's the difference these days? I hear all the time from long term friends and fans of “The Energy Report” who long for the good old days when we talked refinery runs and oil inventories and geo-politics because it mattered to price. Now it is all interest rates and exchange rates and the world has changed. Remember the good old days when we argued about the validity of the inventory reports. We miss the days of wondering why the numbers were so unexpected for the weekly supply reports that left us scratching our heads as to why we had gotten it all so wrong. Well maybe we were't so wrong after all! Today's Wall Street Journal reports on something many traders suspected at over the years and that was that perhaps the Department of Energy inventory reporting was a little off.

Maybe a lot off. Brian Baskin at the Wall Street Journal writes that, “The U.S. government faces "critical" shortcomings in producing its oil inventory data, according to internal Department of Energy documents, casting doubt on figures that affect the production and prices of the world's most important industrial commodity.” Baskin says that “The documents, obtained through a Freedom of Information Act request, expose several errors in the Energy Information Agency's weekly oil report, including one in September that was large enough to cause a jump in oil prices, and a litany of problems with its data collection, including the use of ancient technology and out-of-date methodology that make it nearly impossible for staff to detect errors.

A weak security system also leaves the data open to being hacked or leaked, the documents show. Moreover, problems with EIA data underscore the hazards of depending on companies or other firms to self-report data. Internal emails and a report from a consulting firm prepared in September describe a process at the EIA that served the oil world well in 1983, the first year that oil futures traded, but hasn't kept up as the inventory data have become more influential and the nation's oil infrastructure has become more complex. On Sept. 16, the EIA released data showing almost four million barrels of oil had vanished from the Cushing storage hub in Oklahoma during a single week. The market paid particular attention because Cushing is the nation's most important commercial storage facility.

Its oil is used to fill orders from buyers on the New York Mercantile Exchange. Oil futures jumped 2.2% after the report but out of the sizable drop at Cushing, 1.7 million barrels represented a correction made after the EIA discovered a previous error in one company's reporting, according to the emails. James Beck, who heads the team that conducts the weekly survey, confirmed the correction in an interview. A second company's Cushing inventories also were off by a wide margin earlier in 2009, the emails indicate. Market participants consider the EIA data to be the best window into U.S. supply and demand, with the American Petroleum Institute, an industry lobby group, the only other major weekly source. A must read in today’s Wall Street Journal.


Analyst Phil Flynn can be reached at pflynn@pfgbest.com


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Crude Oil Market Commentary For Friday Evening

Crude oil closed lower on Friday after India's central bank decided to raise its key lending and borrowing rates in an effort to reduce inflation. Investors also fear that central banks in China could follow India's lead. Ongoing concerns about the slow pace of the economic recovery and high global oil inventories also weighed on prices. The low range close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI are diverging and are turning neutral to bearish signaling that a short term top is in or is near. Closes below Monday's low crossing at 79.41 would confirm that a short term top has been posted. If May renews the rally off February's low, January's high crossing at 85.43 is the next upside target. First resistance is the reaction high crossing at 83.47. Second resistance is January's high crossing at 85.43. First support is today's low crossing at 80.14. Second support is Monday's low crossing at 80.89.

Natural gas closed higher due to short covering on Friday as it consolidates some of this week's decline and is trading above broken weekly support crossing at 4.157. The high range close sets the stage for a steady to higher opening on Monday. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If May extends this winter's decline, weekly support crossing at 4.035 is the next downside target. Closes above the 20 day moving average crossing at 4.626 are needed to confirm that a low has been posted. First resistance is the 10 day moving average crossing at 4.439. Second resistance is the 20 day moving average crossing at 4.626. First support is today's low crossing at 4.114. Second support is weekly support crossing at 4.035.

The U.S. Dollar closed higher on Friday and above the 20 day moving average crossing at 80.70 signaling that a short term low has been posted. The high range close sets the stage for a steady to higher opening on Monday. Stochastics and the RSI are turning neutral to bullish signaling that sideways to higher prices are possible near term. If June extends this week's rally, February's high crossing at 81.70 is the next upside target. If June renews Wednesday's decline, the 38% retracement level of the November-February rally crossing at 79.17 is the next downside target. First resistance is today's high crossing at 81.14. Second resistance is February's high crossing at 81.70. First support is Wednesday's low crossing at 79.73. Second support is the 38% retracement level of the November-February rally crossing at 79.17.


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Crude Oil in New York Declines the Most in Six Weeks as Dollar Gains Versus Euro

Crude oil fell the most in six weeks as the dollar strengthened against the euro, curbing the appeal of commodities as an alternative investment. Oil dropped as much as 2.7 percent as speculation that Greece may fail to secure financial assistance from the European Union weakened the euro, which is heading for its biggest weekly decline against the dollar since January. Total U.S. fuel demand dropped the most since November in the week ended March 12, the Energy Department reported this week.

“The market looks like it’s tracking the dollar play,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “It’s also retreating from the $83 level because fuel demand dropped below the five year average.” Crude oil for April delivery fell $2.10, or 2.5 percent, to $80.19 a barrel at 11:11 a.m. on the New York Mercantile Exchange. Earlier, it touched $80.07, the biggest drop since Feb. 5. Futures are down 1.3 percent this week.

The dollar traded at $1.3511 against the euro, compared with $1.3608 yesterday. It’s poised to gain 1.9 percent this week, the biggest increase since the week ended Jan. 29. The Reuters/Jefferies CRB Index of 19 commodities declined 1 percent to 272.75, the steepest drop since March 4. Seventeen of the commodities traded lower. Total fuel demand dropped by 4.2 percent to 18.8 million barrels a day last week, 7.8 percent below the five year average for the second week in March. It was the biggest one-week decline since the week ended Nov. 6.....Your keyword.

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Crude Oil Daily Technical Outlook For Friday

With 4 hours MACD staying below signal line, intraday bias in crude oil remains neutral. Consolidations from 83.16 is possibly still in progress and another fall might be seen to 38.2% retracement of 69.50 to 83.16 at 77.94. But downside will likely be contained there and bring another rise. On the upside, decisive break will confirm rally resumption for 83.95 high next.

In the bigger picture, crude oil is still trading well inside medium term rising channel and the rise from 33.2 might still be in progress. Nevertheless, as such rise from 33.2 is treated as a correction to whole decline from 147.27 only, even in case of another high above 83.95, we'd continue to expect strong resistance near to 50% retracement of 147.27 to 33.2 at 90.24 to bring reversal. On the downside, though, break of 69.50 support will now indicate that crude oil has topped out in medium term already and turn outlook bearish.....Nymex Crude Oil Continuous Contract 4 Hours Chart.

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Where is Crude Oil Headed on Friday?

CNBC's Bertha Coombs discusses the day's activity in the commodities markets, and where oil is likely headed tomorrow.




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