Crude oil ended Wednesday lower as the DOE reported a draw of 2.3M barrels. However, the huge build in gasoline drove the complex lower. Inventories showed a build of 7.8M barrels in gasoline. Builds in both gasoline and distillate put the cracks under pressure. It should be noted that distillate fared far better than RBOB due to a chance in weather forecasts. The new model was responsible for Natgas’ push to the 2.70 area. This amounted to a 5% rise off the low of the day.
For the short term, it appears that energy prices are ignoring anything untoward in the Middle East. News regarding Egypt and the rapid response to President Morsi’s attempted grab at more power was especially prevalent on Wednesday. It was also reported that three presidential aides have resigned. It’s unclear whether this was forced by the President, or whether the individuals fear violence of the mob. For the second day, mobs demonstrated in front of the presidential palace. President Morsi left the palace on Tuesday in fear of his life. Although he returned Wednesday, the security detail around the palace was doubled. This did not deter demonstrators.
Despite the bullish backdrop, energy futures are more concerned with the fiscal cliff and the general economic malaise that has befallen the global market not to mention the waning demand for gasoline. Even the treat of very cold air has done little to spur the market higher.
WTI S2 S1 CLOSE R1 R2 TREND
DAILY 8568 8630 8788 8862 8979 CONGEST LOWER
WEEKLY 7890 8548 8891 9111 9500 CONGEST
Daily Moving Averages: 21, 55, & 100: 87.04, 88.66, 90.94
Weekly Moving Averages: 21, 55, & 100: 91.19, 95.13, 94.86
Continued concerns over the fiscal cliff and abject weakness in rbob conspired to drive Jan lower.
Moreover, there have been more Wall Street reductions in the banking sector. This will no doubt begin to effect volume if it has not already.
Having made its foray above 90.00 but two days ago, Jan has returned to a congestion pattern with a downward bias.
We look to be a seller of the rally at the 88.50 to 88.60 level. The minor upside pivot is 88.88.
Jan will have her eyes set on pattern support at 86.30. That level will be seen with a break of 87.40.
Trend support for this pattern rests at 85.68. This will be protected by the bulls.
On the chart below note the stochastic indicator is rolling over to the downside. This increases the probabilities that our view is correct.