[BillPaay]

October Nymex crude futures settled 25 cents higher on Friday at $72.74. There were a number of economic indicators released Friday to influence price direction. The U.S. Commerce Department reported that consumer spending rose slightly however a Reuters/University of Michigan poll found that consumer confidence fell in August. This caused equities to fall but crude held steady posting small gains on the day. This morning we are seeing major weakness in crude and products as overnight the Shanghai equity market traded down nearly 7%. Crude continues to follow equities so keep an eye on how markets in North America fare today for direction. Products expire today with RBOB showing strength in the crack spreads which is lending support to the sweeter grades. Also worth noting is that spreads in Crude have so far held a bid. Prompt crude is off nearly $2.35 this morning while prompt heating oil is off 6.5 cents and RBOB 4.8 cents. For crude look for it to hold above support at $70.15 prior to $69.08 while resistance can be found at $72.87.

[BillPaay]

Yesterday crude trade cantered on the EIA oil inventory numbers which showed a crude draw of 400,000 barrel, distillates build of 1.2 million barrels and and rather large draw of 3 million barrels in gasoline. On the whole the market took these numbers as bearish as the crude draw was much less than expected. However, as the day wore on the undertone of the report was a good gasoline draw on some larger, albeit small demand increase. That coupled with a steady stock market led to some short covering and new longs as we held our 100 day moving average. Expect the next couple of days to be volatile as important economic numbers are released and pre-holiday (US Labour day) positioning takes hold. On the economic front we have the release today of the weekly jobless claims at 1230GMT followed by The Institute for Supply Management non-manufacturing index for August at 1400GMT. The jobless claims are expected to come in at 560,000 new filings while the non-manufacturing index is expected to show a 48.0 reading vs. Julys 46.4. Both of these numbers will help drive the equity market of which the crude market is closely following. The key will be Friday’s unemployment numbers, expectations are for employment to fall by 230,000 jobs and a rising unemployment rate of 9.5% from 9.4%. As suspected the market is seeing some early strength (up ~70 cents) as it looks to try to form a base. Initial good first resistance comes in at 69.64 followed by the 34 day moving average at $70.74. Downside support comes in today at $66.76. On a close below $66.76 we would be targeting a move to$ 64.63, on a close above $71.54 look for the market to once again give the all important $75 a test.

[BillPaay]

The market has twice closed around the $68 level and well above the 100 day moving average. While the short term direction still remains tough to determine, one thing becomes very clear, a close below the 100 day moving average now at $66.86 is a signal we should test previous support at $64.69 in short order. Today's action should find obvious support at the 100 day MA while initial resistance comes in firstly at $69.90 followed by very good resistance at $71.25. We need to close above $71.25 before we even contemplate getting outright bullish again.