DOE Weekly Report

On May 31, 2012 by TradingDesk
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Energy Prices On The Verge Of A Major Meltdown

On May 31, 2012 by TradingDesk
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Energy prices are on the verge of a major meltdown this week, having already dropped a dime since Tuesday morning. Europe is imploding, and the weaker Euro/stronger US Dollar is driving several commodities to their lowest levels of the year. RBOB and HO face critical tests of support in the low $2.70s this week, and the price reaction from that level may determine a great deal as we head into June. Technical and fundamental data continue to suggest that lower prices are coming.

Perhaps the most notable action in global markets today is that both US and German bonds have hit record low yields, demonstrating the fear that is beginning to grip many traders and investors. With the amount of leverage being used to trade, if this trend continues, we may see much lower prices in a hurry as hot money heads for calmer waters.

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Energy Prices Breaking Down Again

On May 30, 2012 by TradingDesk
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Tuesday’s big rally in stock and commodity markets was cut short on news that Spain’s debt rating had been downgraded yet again. The negative sentiment picked up overnight, with Asian and European shares selling off sharply, although fresh rumors that the Eurozone would create a “banking union” to help solve the most recent crises, has limited the losses to around 1%. While these rumors are unlikely to provide any real solution to the issues at hand, with the Euro and many global stock markets hitting their lowest levels since the summer of 2010 – when QE2 was announced – speculation on central bank activity will surely reach a fever pitch.

Energy prices are breaking down again, after being unable to hold their gains yesterday morning, with news that China is not planning a large stimulus package wiping out hopes for a rebound in oil demand. WTI has broken below $90, and Brent and HO are hitting their lowest levels of the year. RBOB continues to hold support, but with extreme backwardation in the contract, gasoline values will catch up with the rest of the complex when we roll to the new contract on Friday. Look for $2.70 as the must-hold values in products, otherwise a run to the $2.50 range is in play.

The DOE report will be out tomorrow due to the holiday.

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US Stock and Commodity Markets Moving Modestly Higher

On May 29, 2012 by TradingDesk
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US stock and commodity markets are moving modestly higher this morning, as the worst trading month in nearly a year for many markets winds to a close. Liquidity injections into Spanish and Greek banks have eased short term liquidity fears, but at the same time highlight the dire situation across the pond.

While talks with Iran over their nuclear program stalled, again, crude prices are barely reacting as OPEC production increased in the past month, with new barrels from Iraq and Saudi Arabia offsetting the losses caused by Iranian sanctions.

In the near term, energy prices seem to be attempting to carve out a bottom, with a bounce into the mid $2.90 range a strong possibility, although longer term studies suggest this is simply a consolidation in a longer term bear trend.

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Markets Coasting into the Weekend

On May 25, 2012 by TradingDesk
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Markets are coasting into a long weekend this morning with little in the way of news or movement in prices. The Euro continues to sink, hitting a fresh 22-month low a few moments ago, which has helped wipe out small overnight gains in stock and energy prices. The lack of news may be seen as a blessing after another week filled with weak economic data from all over the globe, Europe of course gains the most attention, but slowdowns are noted across Asia and South American emerging economies as well.

Look for energy prices to trade in choppy fashion on either side of unchanged today, as traders balance their books and wait for next week to make their next move. The lull in action shouldn’t be seen as strength however, as most indicators still suggest gasoline and diesel prices are heading towards $2.75.

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Energy Prices Recovering

On May 24, 2012 by TradingDesk
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Yesterday’s morning meltdown in the Euro/USD – currently trading at its lowest level since July 2010 – pushed stock and commodity prices sharply lower. Stocks staged an impressive comeback in the afternoon, erasing all losses, on hopes that another summit of EU politicians can solve the financial crises. The sentiment has stalled this morning however, as negative manufacturing and GPD reports published in China, Germany, the Eurozone as a whole, and just now the US, with domestic durable goods orders missing expectations for the month. Stocks appear poised to consolidate, as traders seem content to wait and see what the central banks will do.

Energy prices are recovering after making new lows for the year overnight. Headlines point to uncertainty in the talks with Iran as the reason for the bounce, although it seems unlikely that anyone really expected something tangible to come from the meeting. While fundamental – Crude inventories at Cushing hit another record high yesterday, and product demand remains weak – and technical indicators continue to favor lower prices to come, our markets do have a tendency to drift higher ahead of long weekends, and with the massive selling that lead up to this one, we’re likely to see a similar move as traders close out their shorts.

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DOE Report

On May 23, 2012 by TradingDesk
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CLICK HERE for a PDF of this week’s DOE report

Another Red Day

On May 23, 2012 by TradingDesk
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Once again, a nice rally in risk assets was snuffed out yesterday, as negative headlines from Europe – this time the former Greek prime minister saying that preparations for leaving the Euro zone were being discussed – threw cold water on what had been a nice 2 day rally. The negative sentiment carried through the Asian and European sessions overnight, and markets in the US are shaping up for another red day as a result. The EUR/USD dropped to its lowest level in 2 years overnight, which could prove the catalyst for the next major move in equity and commodity markets.

Energy prices are selling modestly today, along with stocks, aided by news that Iran is “playing nice” with the IAEA and bureaucrats from several major economic powers who will be meeting with Iranian leaders in Baghdad today. While no actual agreements are expected from the meeting, the lack of sabre rattling has put fears of a supply disruption on the back burner for now. For those keeping score, the supply risk fears had dominated the first 3 months of the year, but now global economic concerns have owned the past 2. In broad terms, these two issues remain the major drivers of energy prices for the foreseeable future.

RBOB, HO, WTI and Brent futures all seem poised to test their lows for the year over the next few weeks, with little fundamentally or technically standing in their way. A break below $2.85 for RB, and $2.82 for HO should signal another dime of losses before finding another resting point.

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Technical Outlook Favors More Selling

On May 22, 2012 by TradingDesk
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Global markets had a strong performance Monday, as hope was renewed that policy decisions could avoid a Greek exit of the Euro zone, and marked the first positive trading day in 7 for many equities. The momentum carried into the overnight trading session with both European and Asian shares rallying, although the mood was tempered by a downgrade of Japan’s credit rating by Fitch, and by another expensive Spanish debt auction.

Energy prices joined in on the rally Monday, but have been held in check today on news that Iran is ready to sign an agreement with the IAEA on its nuclear production, and separately plans to build a new giant export terminal for its oil production. While the pop in prices Monday served to ease a severely oversold condition in refined products, which had each dropped more than 30 cents over the past 3 weeks, the technical outlook continues to favor more selling.

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US Equity Prices Moving Fractionally Higher

On May 21, 2012 by TradingDesk
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US Equity prices are moving fractionally higher, following their worst weekly performance of the year. Pledges from the G8 meeting this weekend has brought renewed optimism that the European crisis can be solved, and promises from Chinese officials to stimulate their slowing economy are helping to push values into the green.

With little economic news on the schedule, energy prices are taking their cue from stocks, and trying to bounce from the lowest levels in months. Technically, all energy futures are severely over-sold, making us due to see a bounce. The mid $2.90 range will be key resistance to the upside for both RBOB and HO prices. If products fail to move through this range this week, expect lower prices in the near future as the overall outlook remains bearish.

The CFTC commitment of trader’s report from Friday shows that speculative long interest has been cut back sharply in the energy markets, but that a significant volume of open interest remains, particularly in gasoline futures. The movement of this money over the next several weeks will play a significant role in determining whether energy prices can bounce from recent lows, or if we’ll head to the $2.50 range like we did last year.

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