[BillPaay]

It was a dollar-driven rally yesterday as crude posted one of its largest gains in the past few weeks. A weakening dollar and inflationary concerns saw investors rotating into hard assets, particularly crude and gold. It was a front-led rally, with producer selling in the back of the curve. The contango in the curve continues to flatten as the front strengthens. The front 12 months of the curve has the contango in WTI approximately $1-1.50 flatter than Brent. If this continues to persist, we should expect to see more crude and products that are still being stored on tankers at sea brought to shore. Again, the true test will be if demand has improved enough to pick up this supply when it hits the shores. If not, the contango will widen out again and front month crude will be pressured lower. Today we are looking for support to come in around $70.80 - the overnight low was $70.82, trend line support is around $70.70, and the 13-day m.a. comes in at $70.90. If this level fails to hold then we expect price to revisit the 8-day m.a. at $69.67 followed by the 5-day m.a. at $69.30. Longer-term support comes in at $67. Market still like this market higher, but given the OPEC meeting and inventory reports over the next couple days we could see a slight pull-back before resuming the up trend. Next upside target over the course of the coming week is the $74-75 area.