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Trading Oil Update – 17th September 2008

After making lows for the 10th consecutive day the bounce saw oil push up to the previous days low at $92.20. This morning’s activity has seen a rally through this level and could lead to further short covering initially targeting resistance at around $94.80. Even with this show of strength the market is still clearly in a short term down trend and will need to break the $98.50 level before showing any technical signs of a potential trend reversal. The short and medium term trends are bearish and the long term remains bullish.

  1. Support: $88.90 (yesterdays low) Resistance: $98.50 (high of 15/09/08)
  2. Support: $88.50 (low of 08/02/08) Resistance: $97.74 (9 day moving average)
  3. Support: $86.83 (low of 07/02/08) Resistance: $94.81 (low of 19/02/08)

Yesterdays continued drop was once again correlated to the falls in equity prices with fears over the US giant financial AIG coming under scrutiny in the wake of the Lehman Brothers collapse. News that the US Federal Reserve decided to keep rates on hold was the main factor in the late rally in oil, due to the fact that the US government are not seeing the current financial woes as a reason to panic. These drivers have also played their part this morning with news that the government is taking a 79.9% stake in AIG in return for its $85 billion 24 month secured loan pushing oil up a dollar. The Inventory figures released later today are expected to show further reductions in stocks, which is helping to hold this oil market up in the short term.

DOE Stock Estimates (change in millions of bbls)
Crude -3.5 Distillates -1.8 Gasoline -3.9