The Greek saga continued for yet another day on Thursday as the G20 meeting opened up along with a surprise rate cut by the ECB that was definitely needed. The situation in Europe is very fluid with changes and 30 second news snippets bombarding the media airwaves and thus impacting prices throughout the day. As I have mentioned before the only constant about the current market is the high level of volatility. The fact that there appears to be an opening for Greece to come out of the mess it with a soft landing by taking the referendum off of the table has been enough to move a modest level of buying interest back into the risk asset markets including oil with is actually trading at the highest level since August.

Europe and Greece are under pressure from the rest of the G20 who urged Europe again today to get its sovereign debt problems solved quickly and to put the details of last week's plan on the table as quickly as possible. Australian Prime Minister Gillard said the world is grappling with a lack of confidence in the markets that leaders will act. It is therefore very important for leaders to act. Greece will remain the focal point today for the G20 and the global investing and trading world as the Greek Prime Minister faces a confidence vote in Parliament.

In addition to the evolving situation in Greece the widely watched US non-farm payroll number will be released this morning along with the headline unemployment rate. The market is looking for a net jobs gain of about 95,000 new jobs with the unemployment rate remaining around 9.1%. Not a disastrous number if the actual number is in sync with the expectations but certainly not a great number as the net new job creation level would still be below what is needed just to keep up with normal population growth and new entrants coming into the market. At this rate of jobs growth is still clearly shows that the US economy is growing very slowly but at least it is growing.

An air of confidence that the EU will move forward in solving its debt problems enveloped the global equity markets over the last twenty four hours as shown in the EMI Global Equity Index table below. The Index gained about 1.7% over the last twenty four hours cutting its weekly loss to 1.7% and its year to date loss to 12.3%. The US Dow is still in positive territory with only five of the ten bourses in the Index still showing double digit losses for 2011. The short term direction of global equity markets are currently captive to the outcome of what happens in Greece over the next few days as well as what the US jobs data shows this morning. For the moment global equities are a positive for oil prices as well as the broader commodity complex.
WTI still trading above the $91/bbl level and the situation in Europe is once again looking like it has a potential to move forward rather than backward as it was doing earlier in the week... I am moving my view and bias back to cautiously bullish. As discussed above the EU may be making progress with Greece. That said WTI & Brent remain closely linked to the direction of the US dollar and the Euro and will remain in this pattern for the foreseeable future. The US dollar and Euro will both be impacted strongly by the outcome of the EU/Greece situation and as such oil prices will respond accordingly. Although oil prices are supported from a technical perspective I still do not like the risk/reward in the oil market and prefer the sidelines today until all of the news around Europe is digested.
I am still bearish but I am sure Nat Gas prices will fall strongly over the short term (next few days). Today's trading session was a bit interesting in that futures prices made a few passes at now breaching a key upside resistance level although the market failed and gave back most of today's gains by the time of this writing. Right now I would categorize today's market action as a key reversal which could result in Nat Gas prices winding up in negative territory before the day is over. I am still keeping my guidance at neutral and keeping my bias at bearish also to see how price activity plays out over the next several trading session. I must say in looking at the fundamentals it is still hard to be anything other than bearish.

As has been the case for the last three or four EIA inventory reports reactions in the market once again reacted opposite of what the data has indicated. Today's Nat Gas injection report was bearish on all fronts (see below for a more detailed discussion on today's EIA report) but yet prices have been in positive territory throughout the entire session. Although prices are now well off of the intraday highs the market is still showing a gain on the session and the futures prices remains above the key technical support level of $3.76/mmbtu.

I know this sounds like a broken record but all around the Nat Gas market is still mostly bearish but yet prices have been holding up fairly well. The potential short sellers remain sidelined while the spec buyers and hedgers have seemed to take control of the market as the winter season slowly approaches. Market participants seemed to have moved into a perception mode and have pretty much discounted the current bearish view of the market. The perception view is pushing participants to look at what the winter may bring insofar as demand is concerned and as such they are now expecting higher prices going forward. In discounting the current bearish situation the market is discounting the fact that in all likelihood total inventories will set another new all time record high prior to the start of the upcoming winter heating season. At the moment stocks are now just 17 BCF below last year and only 43 BCF below last year's all time record high level.

I am not sure the market is going to be able to hold onto the gains without at least one more push to the downside as the shoulder season is lingering on, supply is robust and demand is sluggish at best. That said the market has been reluctant to move down to a level that is more representative of its true value for this time of the year. Needless to say I remain bearish but I am also a student of the market and do pay attention to what the market is saying and right now it is still saying it does not want to move much lower. However, stay tuned!

Currently as a new day of trading gets underway in the US markets are higher as shown in the following table.

Best regards,
Dominick A. Chirichella
Follow my intraday comments on Twitter @dacenergy.