Dominick Chirichella's OilView: Latest As Of Thursday Moring

Has the oil/commodity bubble finally burst? Is the big correction that many have been looking for finally happening? The answer to both of these questions seems to be a cautious yes. For the first time since march 5^th the spot Nymex WTI contract is trading below $100/bbl. In fact it was just three trading days ago (Monday) when WTI hit a high of $111.80/bbl and is now down over $12/bbl since then. The market may be catching up to the fundamentals.

It seems the funds flow into oil has stopped and appears to be reversing itself as many of the financial catalysts that have supported the surge in oil prices are also now giving a different signal.

· The US dollar is in the midst of a short covering rally and has gained ground over the last 4 trading sessions thus pointing to weaker oil prices.

· The economy continues to show signs of further weakening putting pressure on oil prices. Just this morning the weekly jobless claims has risen to the highest level in two months. This is not a sign of a strong economy.

· High oil prices may be at the early stages of further impacting the economy and thus resulting in a decline in demand. The EIA weekly inventory data showed gasoline demand down once again for the week as well as the 4 week average. Higher prices may finally be starting to reduce transportation demand. In fact total oil demand in the US is lagging the same time last year by a little over 3%

· In spite of this week’s surprises on the inventory side the market remains well supplied with gasoline inventories still at the highest level since 1993.

The market sentiment may be changing from decidedly bullish to at the minimum neutral. However, I think the transition is more toward bearish as the bulls are running out of atypical reasons for oil prices to continue to trade at over-valued levels as we have seen over the last 3 or 4 trading sessions. Hopefully all of our readers followed our recommendations of trading the market with tight trailing stops and from a hedging perspective employing option call spreads for purchase type hedging. Both of those recommendations are proving to be on the money for the market environment we are currently in.

Today is the last trading day of the week as both open outcry and electronic trading are closed tomorrow in observance of Good Friday. We should expect a high level of volatility today as many participants head to the sidelines for the long holiday weekend.

Currently prices are on the defensive.

Current Expected Trading Range
	3/20/08	Change	Upper	Lower
		From	Resistance	Support
	8:51 AM	Yesterday
May WTI	$99.63	($2.91)	$112.50	$99.20
Apr HO	$2.9619	($0.0548)	$3.2500	$2.7100
Apr RBOB	$2.5230	($0.0373)	$2.9000	$2.5200
Apr NG	$8.768	($0.256)	$10.250	$8.700