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Daily Oil Price Analysis 9 Feb 2010

Crude Oil Chart 9 Feb 2010

A combination of a stronger US dollar, a small bound in Chinese equities, bad weather in the US and an “inside day” candle pattern on the daily oil chart all helped to breathe some life into early trading this morning, following yesterday’s narrow spread doji cross.  The deep hammer candle of Friday still dominates the chart and we now have to wait for this to be confirmed in due course and, it is interesting to note that in yesterday’s thin news day, that the low of the day found support from the 200 day moving average which suggests that we may witness a recovery in the short term.  Indeed in early oil trading this morning the temporary move lower has once again found support from this key indicator and provided this pattern continues then we could see a shift in sentiment with a consequent move higher as a result.  However, whilst oil prices remain sandwiched between the short term moving averages directly above and the 200 day average immediately below the daily chart remains delicately poised.  In addition we are also trading in a channel characterized by solid support below, and sustained resistance above, and as with the moving averages these areas could dictate the future price action in the medium term.  To the upside we need to see a break and hold above the $80 per barrel price point in the medium term whilst any breach of the $70 per barrel price area coupled with a break below the 200 day moving average would confirm that the present bearish picture remains intact. Overall the WTI ended yesterday’s trading session at $71.70 touching a high of $72.39 and low of $70.77 while Brent closed out at $69.92 having touched a high of $70.82 & low of $69.21.

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With regard to tomorrow’s DOE stats although the EIA is delaying several other oil market reports due this week, as government offices were closed in Washington following the weekend snowstorm, the agency has not changed the date for its inventory data.  The API is also due out later today.  Analysts are forecasting tomorrow’s data to show the crude oil inventory rising by 1.4m barrels, gasoline to be up by 200k barrels while they are expecting distillates to fall by 1.8m barrels.  They are also expecting refining capacity to increase by 0.3% to 78%.

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