Crude Daily Commentary for 4.28.09

Volatility climbed in Monday’s trading session as investors digested the Swine Flu news.  We saw enormous price swings with traders uncertain of what side to be on.  However, the downtrend took control as we anticipated with the crude futures trading comfortably below the highly psychological $50/bbl.  The driving force behind crude’s negative performance is clear.  The spread of Swine Flu is taking a huge bite out of international travel, resulting in less flights and lower consumption of crude. 

Additionally, the Swine Flu is having a negative impact on equities with investors worried that the fragile consumer will buckle under pressure, resulting in reduced consumption and production of goods.  Hence, the demand side of crude is being attacked from several sides.  Though the U.S. won’t release weekly inventories until tomorrow, supply is rising at an alarming pace. 

Hence, both the supply and demand sides are combining to deal a serious blow to the price of crude.  The futures are trading back below our 2nd tier downtrend line, yet are holding firm above our new 1st tier uptrend line and April lows.  Keep a close eye on the S&P futures since the performance of equities will likely be the deciding factor concerning whether crude tumbles past key fundamental supports.

Fundamentally, we maintain our supports of $48.78/bbl, $48.33/bbl, $47.86/bbl, $47.53/bbl, and $46.75/bbl.  To the topside, we hold our resistances of $49.22/bbl, $49.66/bbl, $50.10/bbl, $50.44/bbl, and $51.13/bbl.  $50/bbl turns becomes a key psychological barrier again while $45/bbl serves as a psychological cushion.  Crude is presently trading at $48.84/bbl.

Crude Daily Commentary for 4.28.09

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