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Crude oil has been able to trade firmer again overnight, as strength in global equity markets seem to be fostering an improvement in the global macroeconomic view. But trading could turn choppy and more two sided this session since June crude oil also looks to be running into some overhead consolidation resistance near the $56 level. So far, the market hasn’t been able to take out last Friday’s highs, despite mostly supportive outside market action and that could be a sign the crude oil market may have become a bit short-term overbought after last week’s sharp gains. In fact, even with another initial sharp slide in the US Dollar overnight the crude oil market doesn’t seem to be poised to range up sharply and that has to be somewhat disappointing to the bull camp. The March 31st Commitment of Traders report with Options for Crude Oil showed the “combined” spec and fund position net long at 93,337 contracts as of early last week. But the June crude oil market since that report was compiled has added almost $4 a barrel to prices and that should have inflated the net spec long positioning somewhat. In the near term, the energy complex looks to continue to benefit from the idea that the really dire macro economic outcome is not going to unfold. However, in order for energy prices to forge an upside breakout above the $56 level probably requires a distinct upside extension in the equity market. While it is possible that the market might see some indirect support from news of lower loadings from Norway overnight, the macro economic condition looks to be the main driving force in the marketplace. Initial support in the June crude oil contract today looks to come in around the $54.18 level and a decline back below 84.31 in the June Dollar Index again this morning might be just the catalyst to give the bull camp an added lift.
GASOLINE: The unleaded market seems to have entered the new week with a positive tilt from the action in the equity markets. Initial support in the June contract would seem to come in at the even number level of $1.50. Reports last week of declining gasoline inventories in China probably serve to underpin the US gasoline market, as US gasoline inventories recently have been on a declining pattern. With the US refinery rate also expected to be on the decline into a seasonally slack demand window ahead, the fundamental condition in the gasoline market is also expected to lend support to the bull camp. However, the June RBOB contract would seem to have solid resistance around last week’s consolidation highs of $1.5626. The bias is up, but the market seems to be somewhat skeptical of big upside moves.
HEATING OIL: The heating oil market remains in a bullish posture on the charts but the upward bias mostly seems to be coming off the updraft in crude and unleaded pricing and not because of an improvement in heating oil fundamentals. In fact, with last week’s rise in US heating oil and distillate stocks the fundamental case isn’t favoring the bull’s view. Furthermore, the March 31st Commitment of Traders with Options report for Heating Oil showed the Non-commercial position to be net long 21,931 contracts, with the Non-reportable position net long 15,437 contracts which made the “combined” spec and fund position net long 37,368 contracts as of early last week. With the heating oil contract to this morning’s highs reaching as much as 8 cents above the level where the COT report was measured, one has to think that the magnitude of the spec long has been puffed up quite significantly. Support is now at $1.4636 while upside targeting is seen up at $1.53.
