Latest As OF Monday Morning

After spending the better part of last week not the defensive the market is opening this week also not the defensive. It seems like the energy players are not as convinced as the equity players insofar as the economic slide being slowed by the aggressive intervention by the Fed & US Legislators. Even non-action by OPEC at the Friday meeting with talk of possible cuts at the March meeting was not enough to stop the current slide.

 

Last week we saw most of the World’s equity markets put in modest gains led by the US and see ongoing follow through already in key overnight markets in Asia & Europe. However, oil is still falling and back on its way to testing key medium term support levels as detailed in the table at the end of the email.

 

The market sentiment remains biased to the downside as it has been pretty much since the beginning of the year. We have been predicting that the energy complex will likely test the medium term support levels prior to making any recovery to the upside. For the moment the main oil drivers are biased to lower prices but defiantly not a major sell-off from current levels. Although we believe prices will likely test and possibly breach the support levels shown below we also believe that OPEC is poised to intervene. We do not know at what level they will act but we think it will be someplace into the vicinity of $80/bbl basis WTI. We also believe they will intervene in March at their next meeting.

 

So yes the market has further downside but it will be limited. Not the other hand we do not see any major conditions at the moment that will propel prices back into historic triple digit levels. The market will have to gain confidence that the US economy is not falling deeper and deeper into recession. We expect this week to drift between lower with the potential for reversals at any time, especially if we see a major recovery rally in US equities.

 

Currently prices are lower across the board.

 

Current Expected Trading Range
	2/4/08	Change	Upper	Lower
		From	Resistance	Support
	6:44 AM	Yesterday
Mar WTI	$88.45	($0.51)	$92.50	$85.25
Mar HO	$2.4370	($0.0119)	$2.5600	$2.4000
Mar RBOB	$2.2730	($0.0104)	$2.3600	$2.2000
Mar NG	$7.593	($0.147)	$8.000	$7.500

 

 

Dominick A. Chirichella

Energy Management Institute

tel 646.202.1433

fax 801.383.7510

dchirichella@emimail.org

www.energyinstitution.org

www.advancedenergycommerce.com

 

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