Overview Friday’s market held early gains, ending higher for the 3rd straight day, supported by stronger than expected Chinese GDP data that eased worries about global economic growth and the tight outlook for North Sea crude oil supplies. This capped the 3rd consecutive week of increases, bringing prices up $4 and 4%, with corresponding increases in US East Coast products (see more on a potential developing trend below). Prices are holding steady this morning, supported by Chinese government comments that it was ready step up efforts to boost its slowing economy.
Back on the July 5 report, “Have the fundamentals changed?”, which raised the issue of whether the abrupt reversal of the three month sell-off at the end of June was a lasting phenomenon or not. The argument then was that the long slide had set up an oversold market ripe for repositioning, the “inverse of a bubble on the long side”. Anything that upset the downward momentum would almost inevitably result in knee jerk shortcovering, which as soon as it was over, would see the reassertion of the overriding bearish elements of oversupply and slackening demand growth. Not that that wasn’t true, but what the argument may have overlooked was that the resultant shock to the system would leave the bears reluctant to start selling again, certainly with the same dedication. In turn, that would generate an increasing appetite for buying the dips rather than selling the rallies and this was certainly evident last week. One key – speculators have been adding steadily to length since the end June reversal. Nothing dramatic, just a steady claw back, but one which may be hard to shake without dramatic new indications that the fundamentals really haven’t changed. Technicals, in line with the failure to resume the downtrend, are increasingly biased on the bullish side. A close over $102.39 resistance, looking very possible today, suggests further advances, and the same with $2.82and $2.8250 in Heating Oil and Gasoline respectively. Petroleum Charts Market Commentary
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