A slight rebound in the dollar and a rebounding stock market has the oil market lacking conviction. While in the big picture the bulls still have the upper hand, the conviction to drive oil to the upper end of the trading range is lacking. Yesterday oil seemed to show strength in spite of a firm dollar and a rather weak stock market. It gained more strength as the stocks turned higher after word of an IBM stock buyback. Yet oil failed to reach the heights that we set last week.

Geo-political concerns may have added some support as well as Iran seems to be trying to buy time by asking for important changes to a proposal from the United Nations International Atomic Energy Agency to ship most of its stock of low-enriched uranium to Russia for further processing. This morning the IAEA says that Iran will deliver its response tomorrow. That is assuming of course they do not ask for another 48 hours. With the larger macroeconomic forces controlling oil and ample global supply, these geo-political issues have less sway on the market place. The market did react slightly to a report of a missile launching from Lebanon into Israel. Apparently no one was hurt and the market seems not to be worried.

On the supply front, the API really did not give bulls anything to worry about as we saw draws in every major category. The API reported that crude oil supply fell 3.53 million barrels in the latest week. We saw a slight increase in crude runs yet supply of distillates fell 671,000 barrels and gasoline by 255.000 barrels. The gasoline supply drop was not as spectacular as the dramatic drops we have seen in recent weeks. Even with supply underlying the market, the current interest for energy swirls around the economy and the dollar. Not only do we have to watch inventory but the influx of economic data.

Today we have a full plate with the Mortgage Bankers Association report on purchase applications as well as durable goods and new home sales. Numbers that may have as much or more sway then the inventory report on today's market movements.

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Buy December crude at 7427 - stop 7300. 
Buy December RBOB at 18000 - stop 17800.
Buy December heating oil at 19500 - stop 19300.
Buy December natural gas at 510 - stop 470.