The Energy Report Tuesday, February 9, 2010

You’ve lost that bullish feeling, lost that bullish feeling, you’ve lost that bullish feeling and it’s gone! Oil is trying to find that bullish passion that it lost sometime ago. Yet even after the big oil breakdown last week the market failed to find the inspiration it needed to continue its assault on the downside. Oh sure the bulls were bloodied last week as the PIIGS (Portugal, Italy, Ireland, Greece and Spain) started to fall apart and are hesitant to step back into a market that has definably lost any semblance of what you would consider a bull market yet with a winter storm barring down on the north east and the heartland of the heating belt and the fact that the Euro seemed to stabilize oil tried to make a bit of a comeback.

And of course a little dash of Geo-political tension never hurts the oil market. It may not help it but it sure can’t hurt. Iran is flaunting that fact that it is enriching uranium sending a strong message that they do not care what the rest of the world thinks. And why would they because they do not care what their own people think. Their illegitimately elected President and sphere of hatred says that Iran would start enriching uranium to 20 percent on its own if world continued to play games with Iran. And true to his word Iran today announced that it was indeed enriching uranium to 20%. Maybe he is just mad because he bet the Colts in the Super Bowl.

Nigerian rebel s after threatening all out war last week have been making claims according to Bloomberg News that it “disabled” a trunk oil pipeline operated by Royal Dutch Shell Plc. That in and of itself fails to move the market especially in a world full of a glut of spare capacity yet it is another reason someone may not want to be short.

Oil Prices may try to test the breakout are between 7300 to 7400. At those levels we would recommend putting on short positions. As readers of the Daily Energy Report know we have been saying that we expect a move down towards $40. The daily chart on the March Crude seems to suggest that we could see a move down into the sixties very shortly.

Friday’s employment report was not enough to get traders’ minds off of all of the economic problems that are happing in Europe. Oh sure the market would love to ignore those pesky little problems in Portugal and Greece yes with a less than spectacular jobs number it was impossible to do so. The Unemployment rate did fall unexpectedly down to 9.7%. That was down from the peak of 10.1 percent in October.  Yet the hope that we would see positive job growth was dashed when the report showed we lost 20,00o jobs. We did see some things that were encouraging though. We saw the so called underemployment rate fall to 16.5% which was down from its peak of 17.4% last October and from 17.3% in December. We saw some revisions as well but ultimately it was not enough to get our mind off of the troubles in the rest of the world. Oil Prices fell hard on the stronger dollar but mainly the falling euro but a late rally in stocks here in the United States probably saved oil from a total breakdown.  

In Europe Dow Jones reported that G7-7 financial leaders tried to tamp down continued anxiety about the global economic recovery, with officials promising continued stimulus efforts and European leaders pledging to address public debt problems. Dow says that the debt crisis in Europe, triggered by ongoing problems in Greece and other euro-zone countries, placed a brighter spotlight on the G-7 meeting, prompting European leaders to say they are aggressively monitoring and addressing the debt situation.  "We expect and are confident that the Greek government will make all the necessary decisions," said Jean-Claude Trichet, the European Central Bank president. Trichet added European members of the G-7 will "continue to monitor closely the implementation of these stability measures."   The G-7 also discussed financial sector regulation and how to have the banking sector help pay costs stemming from the financial crisis, but disagreement remained on exactly how, officials said. U.S. Treasury Secretary Timothy Geithner said G-7 leaders are committed to overhauling financial regulation "in ways that don't undermine prospects for recovery."  Regarding Greece, Geithner said European officials "have made it clear to us that they will manage this with great care."  

Iraq is dreaming big.  Iraq’s Oil Minister Hussein Al Shahristani said his country would steadily increase oil production over the next seven years and expects to be OPEC top producer by the year 2016. Take that Saudi Arabia!  

The BBC is reporting that Iran has told the UN's nuclear watchdog it will step up its nuclear programme from Tuesday, raising Western fears that it is planning to make a bomb. Its nuclear chief, Ali Akbar Salehi, said earlier that Iran would start enriching uranium to 20% at Natanz, Iran's main uranium enrichment plant.  So far the oil market is not that surprised. We have been calling for a move towards $40 for some time still we will see some volatility along the way. The key driver will be the dollar and the Euro today! CVall me for the latest at 800-935-6487 or email me at pflynn@pfgbest.com also check me out each day on the Fox Business Network