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March crude hits contract high at $31.78

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Crude prices are on the rise this morning as geopolitical tensions toward Iraq as well as a strike in Venezuela fueled bullishness in the March Light, Sweet Crude Oil futures (cl03h) to a contract high of $31.55 per barrel.

Prudential Securities raised its U.S. oil price and natural gas forecasts for 2003 to $23 a barrel and $3.80/mcf, up from $20/bbl and $3.25/mcf respectively due to "political realities." Despite the raised forecast, Prudential said the demand picture remains poor as global economies continue to struggle.

In the natural gas futures markets, the March contract currently trades $4.89, up 1-cent from yesterday's close.

Later this morning, economic data will be released where economists look for strength to continue in the housing market with November new home sales to come in at 1 million.

Stock futures have been edging lower, while Treasuries find buyers after MSNBC reported that North Korea said it will expel two nuclear inspectors dispatched by the U.N. International Atomic Energy Agency. The move is thought to deprive the U.N. nuclear watchdog of its only remaining means to monitor whether the communist state's recent decision to reactivate its mothballed nuclear facilities would lead to development of nuclear weapons.

S&P futures (sp03h) are currently trading down 3.4 points at 887.40. NASDAQ futures (nd03h) are off 2.5 points at 1,017.50 and Dow futures (dj03h) are lower by 45 points at 8,390.

Fair value for the S&P 500 today is $0.14. That price will not change during the session. HL Camp & Company has their computers set for program buying at $0.24 and set for program selling at $-2.92. Fair value for the NASDAQ-100 today is $3.40.

Early morning buying in Treasuries has the look of a defensive move into the weekend as the benchmark 10-year YIELD ($TNX.X) falls to 3.856%. On a technical basis, this violates the reverse head/shoulder pattern that looked to be developing in this YIELD chart in late November. I consider this morning YIELD break lower to be a negative for equities as cash looks to be finding its way back toward the safety of Treasuries at a more meaningful pace and leaves equities suspect.

Jeff Bailey

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