Last week, WTI front month printed an intra-week high of 8395 on Mon; and an intra-week low of 7770 on Fri; closing the week at 7800. As can be seen from the daily candlestick chart above, selling dominated the entire week. Economic news out of China and the week's EIA petroleum report were both bearish factors that helped drive crude prices lower. As we noted last week, 7800 represents reasonable support, however, even though the Percent R oscillator is now indicating a strong oversold reading, the market may drift lower yet to next support level ~7700-7600. The Feb10 contract comes off the board this week after the 20th, so volume in the Mar10 contract will increasingly be more indicative of market sentiment. Monday is a holiday in the US, so trading will be thin tomorrow - and may be volatile as a result.Watch for consolidation at ~7700-7600, and if this level holds, a reversal higher. A gap opened up between Tue and Wed that the market may try to go back and fill. If the bulls take the market back, a re-test of 8400 could be in play. The Goldman Sachs 2010 forecast of $90 average received a fair amount of media last week, and whether or not markets agree with that outlook, what they say tends to still have an influence on sentiment. Also, the CFTC proposal to control non-commercial participation appears to have been interpreted as moderate, relative to expectations, so this may embolden the bullish skew in the price profile. On the bearish side, U.S. petroleum fundamentals in general continue to be unsupportive. Earnings reporting out of the U.S. over the next weeks will influence views on the strength and rate of recovery of the global economy.
NYMEX natgas put in a range-bound week between 580-540. A large draw on U.S. stock levels was bullish, but was overwhelmed by above normal weather temperatures and a forecast that indicates more of the same. The technical price profile suggests a bearish pennant is in development, implying that a significant test of 540 support could be in play in the near term. On the bullish side, a return to even 'normal' winter weather will provide support, and a return to above normal cold could take the front of the curve back to 600. Inventory levels are now back to within the five year range, albeit they remain above the five year average and last year's level.