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Correction Sets Up Major Trend Decision


While a favorable jobs report and declining US infections are favorable demand developments, the energy market has seen several bearish supply developments in the early Monday trade. First and foremost in the bear’s quiver are insider reports that US and Iran talks are set to conclude which the trade interpreting that as a sign that Iranian oil could find its way back to the market. On the other hand, a cyber-attack of a European oil distribution hub and predictions that China will have to “restock” should provide modest underpin for prices.

Like crude oil, the gasoline market forged very significant gains last week, with a low to high rally of $0.20 and that could leave the market subject to corrective weakness and a possible dip in March gasoline back below a key pivot price of $2.6375. While the gasoline market could be considered to have the least bullish fundamental supply set up of the complex, demand is strong enough to keep EIA stocks near last year’s levels.


With the aggressive breakout down last week followed by a gap lower extension this morning, the path of least resistance is pointing down in natural gas. Clearly, the charts leave the natural gas market in a vulnerable position to start the new trading week. However, the $4.25 level could be formidable support especially given last week’s EIA report that showed current storage versus the 5-year average has expanded its deficit to year ago levels to 5.8%.

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