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Oil Trading Analysis 24 August 2009

Oil trading today was interesting for a number of reasons: first the oil market was well supported despite a pullback in equities and with the S&P ending the trading session on a upthrust candle (a signal which can denote weakness)  the forthcoming Asian session should be watched particularly carefully.  Second the WTI oil contract managed to withstand some strengthening of the US dollar, particularly against the Euro, a currency pair which is closely followed by many oil traders.  Finally there appears to be a further strengthening in the crude curve with the front Oct-Sep WTI spread drawing to its narrowest since late June.  Technically the oil market is at a critical juncture given the proximity of the oil price to the $75.25 per barrel price handle and any close above this may trigger a further influx of capital into the long side despite oil market fundamentals which are still decidedly bearish.

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