The global recession continues to be the main driving force behind the crude oil bear market with weak demand leading to continued surplus inventories. Despite solid gains in the prior week, the Bears quickly rejected early advances last week into the key weekly Resistance range at 4800-5000 on reports that OPEC cuts may not be large enough against shrinking demand. Trade for the remainder of the week was sideways and choppy as the Bulls defended technical support at the 4020-3950 gap on concerns of a potential strike at U.S. refineries. Crude oil price settled for the month of Jan. at 4168.

This week’s focus will be on the potential refinery strike that would limit fuel supplies if enacted and on OPEC’s continued attempts to work down inventories through its production cuts. From the technical perspective, we’ll be focused on 4020-3900 key Support. Maintaining trade above this range keeps the market in the sideways congestion pattern between 4000 and Key Resistance at last week’s breakdown and 3 month downtrend line (3 M v TL) 4500-4625. With the overall trend down, maintain a ‘sell rallies approach’ this week until 4500-4625 is violated.

Trade below 4000 is bearish, but only trade below 3900 will accelerate downward momentum with an initial target range at the 2009 March contract low at 3800 down to 3600. Failures to regain the 4000 level will set the stage for a larger move lower targeting major Support at the 11 year uptrend line (11 Y ^ TL) at 3320 to 2008/2009 Spot lows at 3270-3248. Any moves below 3248 opens the flood gates for flush to 3000 initially and overall the 2850-2650 range.

Pushing trade above 4625 this week will strengthen rallies for retesting of the 4800-5000 Resistance range. Producing a close for the week above 5000 is extremely bullish with near term projections to 5500-6000 and potentially to 6500-7000 by month’s end.