Coffee Cup News April 5

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AUSTERITY SUCKS. Especially when the populace feels there is no way out. While there is of course a way out, it is an anathema to the IMF and ECB. The way out is to put into place growth objectives for HOPE. People cannot live without hope, without purpose, without a normalized environment. This was graphically pointed out by the gentleman who committed suicide publicly at a square in Greece. He left a note that made sure what prompted his action. The is highly reminiscent of the touch off to the Arab Spring when a Tunisian man set fire to himself to protest the government taking away his livelihood. Is this the beginning of the Arab Spring circa 2012? Is the clothe that is Europe being rend? It is definitely frayed, but will it shred. The next few weeks will shed the light. Regardless, the euro is likely to stay with sell pressure and that mean oil traders will have that head wind to buck if one is a bull. Nevertheless, some noted economists are taking up the cry for growth. They are remembering when Australia completely ignored the IMF recommendations for austerity and instead promoted policies for growth. We all know how well that country fared following that bold action. This is Austrian economics at its finest.

No, things have changed perceptively in the view towards risk. The punch bowl is being taken away and with it indiscriminate support for all things material. Oil traders will have this to ruminate on over the weekend.

But things are also heating up for Iran's exports. Now shippers cannot get insurance for ships carrying Iranian crude oil after July. These are Asian shippers. Buyers will not ship oil without insurance. Iran has had their banking sector cut off from the SWIFT balance of payment system being banks. Therefore they cannot receive payment for oil n normal ways. This will be a stumbling block for that government. Moreover Israel yesterday said that Iran has not slow their nuclear work one bit.

Moreover, news from the North Sea finds that Forties May program is down 70k b/d on the month exacerbating the already tighter supply of the U.S. cousin.

All this should proved for an interesting day of trading in the energy markets. We believe it will be a two way market with Jobless Claims setting the tone for the day.

CRUDE: Hi:102.43; Low: 101.56

The market will respond to the Jobless Claims and the dollar today.

• Our model suggests that WTI will continue to slip from the overnight high of 102.43. This will be the minor upside pivot of this model.
• If the model is correct, there will early weakness followed by surprising strength. We are in a two way market the dip mode for later in the day.
• Ideally this will be below the Wednesday low of 101.08. To be clear,  by a dip we mean below that low. The reason for further weakness may be margin selling spilling over from the metals and equities or it may be the dollar.
• Nevertheless, the minor downside pivot to further weakness, is 101.30. Piercing that level is likely to mean a drop through 101.00 to see the 100.30 to 100.10 zone. This is likely to hold.

RBOB: Hi: 3.3457; Low: 3.3169

Although there was some strong liquidation Wednesday, it is unlikely that all the managed funds have exited positions built up over the past several weeks.

• Additionally, there will be margin selling to reckon with later in the day. That usually becomes known at around 11:00 AM EDT.
• Our model suggests that May will move lower to test the Wednesday low. It will have a minor upside pivot at 3.3450 for this model. The key upside pivot to the intraday chart is 3.3625.
• The initial support will be found at 3.3175. A break of 3.3150 will signal a drop to key support at 3.2875.
• There will be wailing and gnashing of teeth with a break and daily settle below 3.2775, however, we do not think that likely for today.