To Energy Markets, Politics Can Be A Drag

On April 18, 2012 by TradingDesk
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The energy markets were once again dragged into the political arena Tuesday, as the President laid out a 5 step plan to curb speculation in the markets. Limiting the FED’s ability to dump printed money into the markets was not on the list. While WTI was the target of the plan, it has been RBOB that has suffered the most as a result, as the gasoline contract has been sitting on record levels of speculative length all year, and now it seems that the fast money is heading for the exits.

News that there are multiple bidders for Conoco’s idled Trainer refinery also contributed to yesterday’s selloff, since it appears that one way or another, East Coast refinery production will increase this year. The selling broke critical technical support for RBOB yesterday, which set off a rash of stop orders this morning, pushing the contract more than 8 cents lower on the day just a few moments ago. Both HO and CL are still holding above support, and are seeing very modest selling as a result.

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Brent Crude Falls To 2 Month Low

On April 17, 2012 by TradingDesk
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News that the reversal of the Seaway pipeline, which will bring crude from Cushing OK to the gulf coast would start early sent Brent crude to its lowest in 2 months Monday. Refined products in the US fell nearly 2% in sympathy, while WTI managed small gains now that the end of the land-locked supply issue is in sight. RBOB and HO are trading very near their critical support levels, where the contracts bounced more than a dime a week ago.

Financial markets had a very unusual day, with the Nasdaq and S&P finishing the day lower, while the DJIA had solid gains. While that type of action isn’t without precedent, it does stand in stark contrast to the heavy correlations we’ve seen between financial products the past few years.

What has really thrown a wrench into the conventional thinking machine is that many commodities are selling off despite a weaker dollar/stronger Euro. Many are blaming a rapid repatriation of Euros from banks that are desperately trying to shore up liquid capital stores ahead of the anticipated debt rating downgrades. If true, we may end up with a situation like we saw last fall where risk assets decline rapidly as banks remove liquidity from the system. The question becomes what can/will the central banks do to ease these fears.

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Soaring Spanish debt yields pushes euro and energy lower

On April 16, 2012 by TradingDesk
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Soaring Spanish debt yields and the anticipation of widespread credit rating downgrades of banks has pushed the Euro to its lowest level in a month, helping to drag energy prices lower this morning. Stocks are faring much better, after retail spending in the US expanded in March, even when you remove high gasoline prices from the equation.

Talks with Iran over the weekend about their nuclear program have been seen as positive short term, at least enough for Brent crude to drop more than a dollar this morning, although most are reluctant to see the move as much more than a stall tactic for the country. Friday’s news that Iranians have been able to sell much more of their product by disabling tracking devices on crude tankers to avoid recently imposed sanctions was just one more in a long line of bearish fundamentals for energy prices.

RBOB and HO appear poised to test the lower ends of their trading ranges again this week. Watch the mid $3.20s for support on RB and $3.10 for HO. If support holds again, we may simply head higher as we did last week, while a break below may finally signal the end to the 2012 spring rally.

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The Fed/China Stare Down

On April 13, 2012 by TradingDesk
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After a FED governor’s comments sent markets soaring Thursday on fresh hopes of QE, economic data from China and Europe are pushing us lower today. China’s GDP growth slowed by .8% vs. the previous quarter, although the country’s economy is still reported to be growing at an 8% clip. Italian industrial production dropped nearly 7% compared to last year, as austerity measures meant to salvage the region from its debt crises has cut deeply into consumption.

Energy prices have taken back all of the losses from the first half of this week, and now seem content to consolidate back within their trading ranges while they wait to see who will win the staring contest between central bank liquidity and real economic activity. Technical indicators still give slight favor to the bears, but the Iranian situation which has been placed on the back burner for a couple weeks, continues to weigh heavily on the equation.

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Energy Values Slipping This Morning

On April 12, 2012 by TradingDesk
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After staging a big bounce Wednesday, equity and energy values across Europe and the US are slipping this morning, after a large increase in weekly jobless claims has brought the “risk off” sentiment back to the markets. Conflicting views from the FED governors regarding the likelihood of more QE continues to dominate the headlines, with the free money lifeblood of risk assets hanging in the balance.

Energy values continue to give slight favor to the bears, although critical support levels are holding for now. RBOB calendar spreads are threatening to break their highs of the year, suggesting that the record volume of speculative dollars in the market aren’t ready to leave just yet, keeping the possibility of a rally back above $3.40 on the table.

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DOE Weekly Inventory Report

On April 11, 2012 by TradingDesk
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CLICK HERE for this week’s Department of Energy inventory report.

US and European Equity Markets Recovering

On April 11, 2012 by TradingDesk
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US and European equity markets are recovering this morning after their worst daily and weekly performance of the year. The ECB stepped in to buy Spanish bonds, easing concerns over short term liquidity, and helping the Euro to bounce. The earthquakes around Indonesia seem to have had little to no effect on the markets as it appears that the damage has been limited and no Tsunamis have been reported.

Refined product prices are continuing their slide today, while WTI is holding on to slight gains, despite the API report last night showing a 6 million barrel build in crude stocks. Analysts are expecting more builds in today’s DOE report as demand continues to lag. Technical studies continue to point to lower prices as major support levels in WTI and HO have broken down. RBOB still has a chance to salvage its 2012 rally, but the odds of doing so are decreasing each day as we move through the window for our spring peak in gasoline prices.

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Will The Beatings Continue?

On April 10, 2012 by TradingDesk
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The pullback in equity and commodity markets continues this week, with broad selling seen Monday as traders had their first chance to voice an opinion on Fridays payroll report. Of the major market driving themes over the past year: European debt concerns, Central Bank policy, global economic growth and Middle East tensions, each one has provided a little something for the bears to cheer about.

Energy prices are reaching critical support levels which should determine if the past two weeks have simply been a correction in an ongoing rally, or the beginning of a new bearish trend. WTI and HO continue to favor the bears, and although RBOB remains relatively strong, it is quickly rolling over into negative technical ground. Look for the areas around $100 in WTI, $3.20 in RBOB and $3.10 in HO as the “must hold” support values for the bulls. If these levels break, products should drop another 10-20 cents over the next few weeks.

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Energy Prices Slipping into Correction Mode

On April 5, 2012 by TradingDesk
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The mood in financial markets turned decidedly negative yesterday, as the old fears of unsustainable debt across Europe once again showed up front and center and it seems that the FED isn’t poised to come to the rescue just yet. Early morning selling turned into broad liquidation by the end of the session with several global stock markets and commodity classes ending 2% or more in the red.

The Euro is leading the way lower again this morning, having wiped out all of March’s gains in the past 3 trading sessions. Weekly jobless claims dropped a few thousand from a week ago to 357,000.

Energy prices are slipping into correction mode, with technical pointing to more downside as the bottom end of recent trading range is tested in each contract. RBOB’s record high spread values were short lived yesterday, with values dropping more than $3 a barrel. While it may be too early to say that the top is in on our spring rally, if nearby support levels don’t hold we could take out another 20 cents in a hurry. The DOE report yesterday showed a continued improvement, modest though it may be, in product demand, but a market that remains well supplied in general and reliant on exports to balance inventory in the US.

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DOE Weekly Inventory Report

On April 4, 2012 by TradingDesk
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CLICK HERE for this week’s Department of Energy inventory report.

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