Crude Daily Commentary for 4.22.09

Crude recovered some of its losses yesterday as U. S. equities posted solid gains on the session. However, the stabilization is proving temporary as the futures head south again today.

We've noticed a considerable spike in volume recently, likely due to bulls taking advantage of what they view as oversold conditions. Despite buyers coming to the forefront, the futures have made a clear commitment to the downtrend by setting new Aprils and bidding farewell to the important $50/bbl level.

Negative corporate earnings are obviously having a profound impact on Crude and the outlook for production and consumption. We expect the high volatility to continue throughout the rest of the week as today's Crude Oil Inventories kick off a stream of important data releases over the next couple days.

Investors are expecting this week's inventories to come in at 2.3 million barrels, an improvement over last week's surprising 5.6 million reading. If the inventories are to surprise to the upside again, we could see pressure build to the downside.

However, if inventories come in lower expected we could witness a solid rally. If the futures manage to climb back above $50/bbl, crude could post large near-term gains.

Regardless, crude futures should maintain an overall positive correlation with U. S. equities since corporate performance has a direct impact on production, unemployment, and consequently consumption.

Fundamentally, we find resistances of $48.94/bbl, $49.29/bbl, $49.70/bbl, $50.21/bbl, and $51.02/bbl. To the downside, we see supports of $48.33/bbl, $48.00/bbl, $47.58/bbl, $47.23/bbl, and $46.58/bbl. The crude futures are presently trading at $48.44/bbl.

Crude Daily Commentary for 4.22.09

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