Volatile is how to describe the energy futures markets over the past few weeks-with markets like crude oil moving four dollars higher one day, and then six dollars lower a few days later. Reactions to the U.S. dollar index (as well as geopolitical risk) seem to be the reasons for these types of moves. Crude oil and gasoline blendstock for oxygen blending (RBOB) futures appear to be losing momentum with each push higher, pressured by overbought conditions and the continued threat of decreasing demand. Natural gas futures have seen a bit of a sell-off in the past couple of weeks, but have been able to maintain the long-term upward trend. And if the market sees continued draws on supply, it should be set to move higher soon.

May crude oil broke above 110 per barrel in mid-March, but has struggled to return to that price level. However, despite the overtly bearish inventory report on the third of April, the market has not traded lower than 10321 since. OPEC (the Organization of the Petroleum Exporting Countries) has said numerous times that it believes the world is adequately supplied, and it doesn't intend to increase production. The swings in the crude oil market run inversely to the swings seen in the U.S. dollar. Additionally, the crude oil market has seen some support from the bullish inventory reports for RBOB. This week, market analysts are expecting another increase in crude inventories of 2.5 million barrels. The market seems determined to move higher.

May RBOB continues to make contract highs pushing above 278 on Monday, April 7th. The inventory numbers for RBOB were significantly lower than expected, a drop over 4.5 million barrels. The following chart appears to show that the market is becoming overbought and poised for correction. However, refinery rates are at their lowest levels since Hurricanes Katrina and Rita struck the U.S. in 2005-and are not expected to get much better until after spring maintenance is complete. That, coupled with the fact that "driving season" officially begins with Memorial Day here in the U.S., could push this market above this tough 280 level.

The weather is beginning to warm up, so the demand for natural gas as a heat source should begin to wane. But the inventory report from last week showed another draw on inventories. Natural gas is being considered as an alternative to oil for industrial cooling needs, because it is so much less expensive in comparison. The May contract made a high in mid-March of 10365, and sold off almost two dollars over the following six days to make a near-term low at 8750. The market remains in an uptrend long-term, but near-term has carved out a trend lower. Weakness in this market should be bought, however-not strength sold.

Keep in mind that the May crude oil goes off the board on April 22nd, while the last trading day for May natural gas is April 28th and for May RBOB and heating oil is April 30th.

Support/Resistance:

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