THE ENERGY OVERVIEW
DAILY TOTALVIEW
January 4, 2011
Michael Fitzpatrick – Editor-in-Chief
Twitter: @EnergyO [email protected]
@KilduffReport 212-618-2107
PETROLEUM MARKETS
Hardly surprising that net length grew, as reported by the CFTC’s Commitments report; not with the dollar taking a beating and the recent cold. Still, we are always nervous when records are posted, usually a reversal is not far off. In this case it may be the dollar more than the market’s fundamentals that does it. Pay no mind that the yuan posted new highs against the dollar recently. Participants must be expressing relief that recent surveys showed Chinese producer prices rose at their slowest rate in three months possibly showing the effects of recent Chinese monetary measures. Expectations for continued colder weather are carrying crude’s momentum over into the heating oil and RBOB pits as well. Add to the general level of economic optimism that is fueling this inexorable rise, is the possibility of supply tightness stemming from the fact that more than two months after the Administration lifted its ban on deep-water drilling, oil companies are still waiting for approval to drill in the Gulf.
TECH TALK: The crude chart remains decidedly bullish. Prices remain above the 10, 40 and 200 day moving averages at 91.29, 87.83 and 83.25 respectively, which means there is an active buy signal. The 10 and 40 day marks are beginning to move farther apart showing the effect of the upward momentum. The May 3rd high of 93.87remains unbroken and should present fairly stiff resistance. Stay with length but a settlement below 90.00 may provoke stop-loss selling.
NATURAL GAS
Gas powered into the new year supported, once again, by the return of cold weather, mostly in the Midwest, between January 13th and 17th. Momentum off of yesterday’s opening gap also produced some bullishness. Certainly, the reaction to the colder weather reflects the idea that the oversupply situation will erode somewhat; and it will. However we can’t help but feel that once the mercury drops, so will prices, particularly with almost 3.4 Tcf on hand approaching the halfway mark of the heating season.
TECH TALK: New highs for the move were posted and also bested the previous high, posted on December 9th at 4.635. Prices continue above the 10,40 and 200 day moving averages, highlighted in the chart above which means there is an active buy signal. Most price action so far today has been above the daily pivot of 4.61 which suggests tactical short entry as well. However, the lack of follow on buying makes us a bit nervous at these levels. Stay with established longs but stop out if prices break below the pivot.