Bailouts, Anyone?

On March 30, 2012 by TradingDesk
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Commodity and US equity markets are slightly higher to start the last trading day of a very strong Q1. Prices are buoyed by a rally in the Euro after the European “firewall” bailout fund was allegedly expanded, which is good because Greece also announced that it would likely need a third bailout.

Markets have popped a bit more in the past few minutes after Personal spending for February increased by .8%, the most in nearly a year, although incomes grew by only .2% failing to meet estimates roughly twice as large.

WTI broke a key technical support area yesterday, which set off a rapid bout of selling across the energy complex and ended with both HO and WTI hitting their lowest levels of the month. RBOB managed to shrug off most of the selling, and remains the strongest technically as we approach the seasonal peaking window for gasoline prices in April/May.

As we head into the second quarter, the main issues that will impact prices have not changed. The world’s central bank policy decisions to manage a challenged financial system such will dictate much of the action in risk assets. Energy fundamentals remain in a stare down between sluggish demand, and fears of supply disruptions in the Middle East.

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A Trio of Reports Knock Oil PRices Lower

On March 29, 2012 by TradingDesk
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A trio of reports Wednesday knocked oil prices lower as rumors of another multi-national SPR release and an actual 7 million barrel build in US stockpiles, reminded traders that there is plenty of oil available despite what is or isn’t happening in the Middle East. Refined products fared better as stockpiles drew thanks to a pickup in weekly demand and export figures.

Products are gaining this morning, following European grades higher, despite WTI ticking lower. The WTI/Brent spread has broken below -1900, which should set up a test of the year’s lows at -2100.

US Equities are also following their European counterparts lower so far. The latest revision of GDP showed growth unchanged from the last estimate at 3%. Weekly jobless claims were much higher than estimates, as initial claims rose 9,000 and last week’s estimate was revised higher by 16,000.

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Stocks Pulled Back From Monday’s Big Gains, While Energy Remains A Political Football

On March 28, 2012 by TradingDesk
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Stocks pulled back from Monday’s big gains yesterday morning, following several soft economic data points. Energy prices were slipping in sympathy, then the selling picked up following a Bloomberg headline which suggested the White House was prepared to announce a release of US SPR oil stocks to win an election try and lower prices.

Not to be out-done, this morning a French newspaper announced that the country is in contact with Britain and the US, and that a release of strategic stocks was a matter of weeks away. Prices have fallen on the news, but as has become the pattern of late, are already bouncing as the rumors are refuted. It’s impossible to say what the politicians have decided, but looking to last year’s coordinated effort as a guide, it does seem safe to say that any impact on prices will be short lived.

The US Commodity Futures Trading Commission (CFTC) also issued an advisory, reminding traders that it would still be enforcing position limits on speculative positions. The motive for the warning wasn’t stated, but the resultant short-term selling that resulted shows just how much hot money there is influencing prices these days.

Meanwhile, in the physical energy market, last night’s API report showed builds in Crude and Gasoline stocks, and a draw in distillates. The DOE report is expected to show the same at 9:30 today, with the hotly debated, historically weak, demand figures surely to draw the most attention. The technical outlook remains stuck in neutral.

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Hints Of More Money Printing

On March 27, 2012 by TradingDesk
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Hints at more money printing from Helicopter Ben Bernanke sent stock and commodity prices soaring Monday, as cheers for free money and fears of resulting inflation brought out buyers from all sides. Energy prices were relatively subdued, as the contracts struggle to deal with a weakening fundamental outlook and range-bound technical trading.

Prices are slipping a bit this morning, following the Euro lower after Spain and Italy sold short term debt, but had to pay more to do so. The moves are unimpressive so far, with many apparently waiting for a raft of economic data this morning to decide the state of the economy – or, more importantly – the FED’s reaction to it.

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One Headline Triggers A Variety of Mechanical Trades

On March 26, 2012 by TradingDesk
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Friday’s trading session was dominated by a single headline suggesting that Iranian oil imports had dropped sharply in March. On its own, this wasn’t really news, but the headline triggered a variety of mechanical trades, sending WTI up $3 in less than 3 minutes. RBOB rose 7 cents in the first few minutes following the headline, setting new highs for the year, only to fall 6 cents in the next 5 minutes.

Prices have risen again this morning, all in the past 20 minutes, as a speech by Ben Bernanke has traders anticipating more free money courtesy of the FED. RBOB is breaking out of its March trading range, to the upside, and is currently less than 8 cents from last year’s high. WTI and HO look less bullish technically, but still appear set to test the upper end of their trading ranges, after failing to break through the bottom end last week.

The NYMEX has announced plans to keep the HO futures contract with an ULSD spec beginning next April, scrapping plans to convert to a new futures contract once the heating oil specs expired.

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A Quiet Overnight Session of Trade

On March 23, 2012 by TradingDesk
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It’s been a quiet overnight session of trade, after yesterday’s broad “risk off” selling. Asian markets remain cautious as rumors of political unrest in China keep buyers on the sidelines waiting for more news.

In the US the news seems to be sharply focused on energy prices, and what the politicians can do to solve the problem. After a one day rally on news that the lower half of Keystone would be expedited, the WTI/Brent crude oil spread reversed course, suggesting traders aren’t buying story. Refined products tested the lower end of their trading ranges, but bounced late in the day yet again, proving that indecision reins in energy markets for now. Our recent pattern has been to push higher ahead of the weekend, and without any major economic headlines expected today, look for that trend to continue.

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Economic Concerns Pushing The Dollar Higher

On March 22, 2012 by TradingDesk
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Economic concerns are pushing the dollar higher, and many global stock and commodity markets lower this morning, following weak manufacturing reports out of China and Europe. Downtrends in these data sets over the past few weeks has the energy market struggling choose between two evils, weak demand or supply disruptions.

Yesterday’s headline that the Cushing to Houston section of the Keystone pipeline would be “fast tracked” put spread reversals in the spotlight, as WTI gained while Brent and product prices finished with small losses. The technical outlook remains stuck in range-bound mode, although the slip up in stock prices we’ve had this week does hint that we’ll test the lower end of this range first.

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DOE Weekly Inventory Report

On March 21, 2012 by TradingDesk
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CLICK HERE for this week’s Department of Energy inventory report.

 

Energy Prices Stuck

On March 21, 2012 by TradingDesk
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Energy prices remain stuck in their trading range, albeit modestly lower, after failing to follow through yet again at an early morning sell-off attempt yesterday. Brent Crude is leading refined products into the red, following exemptions to Iranian sanctions granted to 10 nations that lowered their import volumes, which is seen as a temporary reprieve from the constant tensions.

RBOB bounced off of its 14 day moving average for the 3rd time in a week yesterday, and remains above its 4-month old bull trend line. We are only a few cents away from breaking the highs for the year, which sets up a 10 cent run towards last spring’s peak. 3.3868 is the key number. HO looks relatively weak, with some technical studies rolling over into bearish territory and its trend line breaking down last week. Key support for HO comes in around $3.17, with a break below that level targeting $3.05. There are still record amounts of money sitting in the energy contracts, so expect choppy action as traders position themselves anticipating a breakout of our recent range.

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Slowing Demand and Supply Reassurances Impact Energy Prices So Far This Morning.

On March 20, 2012 by TradingDesk
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Slowing Chinese demand, noted by BHP Billiton, and supply reassurances from Saudi Arabia have taken 1% out of energy prices so far this morning. China also announced it would raise gasoline prices by 7%, which again raises the issue that a majority of the “emerging market” demand that has been the driver of so much over the past several years is subsidized, putting the burden of high prices squarely on the governments’ shoulders. Price hikes in 2008 contributed to the eventual collapse in prices, we will see if they can do the same in 2012.

After failing to break upside resistance yesterday, products remain stuck in their trading range with a neutral technical outlook. Global equities are slipping this morning, which will probably dictate direction until energy can find a new trend to follow.

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