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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
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
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.