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Market Update 11 06 10

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Crude and Natural Gas Price outlook

Crude and Natural Gas Price outlook

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  • 1. Market Update 11/05/2010 The 20th of October CFTC Non-Commercial interest in the NYMEX natural gas contract shows a reduction of short interest of 7,100 lots to a net short position of 158,000 lots. Liquidity Flow Non-Commercial Interest in the crude contract increased by 4,000 to a net long of 130,000 indicating an expectancy of a further increase of the crude to natural gas multiple. The crude contract is about to break the previous high ($87) for the year reached in May on continued dollar weakness with a strong support level at $80. Natural gas is also Technical testing the resistance level in a tight trading range between $4.00 and $3.70. Momentum indicators are signaling a break through of resistance levels for both crude and natural gas. Inventory levels for Natural gas will reach records levels before the withdrawal season this year, while very low import levels to the US of crude and petroleum products have helped reduce record petroleum inventories during the past few weeks. Even though the Fundamental GDP growth levels will be modest for the 4th quarter, quantitative easing by the Federal Reserve has weakened expectations to the US dollar. To what extent fiscal policies could boost GDP expectations and energy consumption remains uncertain. The composite picture for crude and natural gas remains overshadowed by continued weakness of the dollar. Even though GDP outlooks for the 4 th quarter are somewhat improved, the supply situation remains very healthy (especially for Natural Gas). Composite Market Strategists should therefore closely monitor USD support and resistance levels and it is recommended to protect current price levels, even though the near term potential for continued weakness of the Dollar ($1.50 EUR) could drive crude prices to $95 bbl.