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Schork Oil Outlook: Are the Bears Running Out of Steam?

ENERGY PRICES WERE MIXED ON MONDAY…as natural gas closed lower in impressive fashion and the liquids did not. Thus, whereas natural gas futures are now trading at seven-year lows and appear to be en route to a $2-handle, you get the queasy feeling that the bears in the liquids are already running out of steam in the mid $60s.

We are unimpressed and therefore unconvinced the bears have what it takes to impart their will on this market. As we noted last month apropos the last technical correction after a failed run to $75 in spot WTI…

Meantime on the NYMEX it is do-or-die for the bulls. Quite frankly, the selloff to this point was the easy part for the bears. Now they have to man-up and play the varsity. To wit, last night the market closed inside the 50/62% retracements (ratio scale) from 61.25 to 58.59. If the bulls are going to put up a defense, this is where it will occur. If they succeed, then this support will act as a springboard for a second run at $75. If they fail, the path towards a $40-handle will be wide open.

The Schork Report – July 9, 2009

In this vein, the weakness on the NYMEX since Thursday is nothing but noise inside a well defined range between the high $50s and low $70s. Therefore, we will update our statement from July 09th…We can see this market falling further into the 50/62% retracement. In the September contract that means a pullback towards 62.31 and 59.70. Should the bears succeed in breaking this support, we will look for a flush into the mid $50s and a run at a $40-handle. Should the bears fail there (or fail here in the mid $60s for that matter) we will look for a third attempt at $75.

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Stephen Schork is the Editor of, "The Schork Report"and has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.