Potential for Progress

On June 29, 2012 by TradingDesk
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Euphoria reigns across financial markets this morning, surprised by news of the actual potential for progress in Europe. While the details of the plan are sketchy at best at the moment, and legal hurdles remain to be cleared, the bottom line is concessions have been made that should allow for an easier bailout of the troubled banking sector. The Euro has wiped out 2 weeks of losses in a few hours on the news, global stock markets are up 2% or more in most countries, and crude oil prices are up 4.5%.

While this morning’s move has been dramatic, so far it has simply brought energy prices back into the middle of their June trading ranges, so it’s too early to say that a new bull market is underway. If products can clear $2.70, and hold there, then we’ll be looking for a substantial move higher throughout the second half of the year.

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Stuck In the Middle

On June 28, 2012 by TradingDesk
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Financial markets remain stuck in their volatile, but generally aimless trading ranges, with yesterday’s gains in stocks already wiped out during overnight trade. Spanish and Italian debt yields have surged again, which is putting some selling pressure on the Euro, although a major move is unlikely until after the latest EU Summit taking place today and tomorrow. The supreme court decision on US Healthcare law today will be closely watched, and could cause some swings in prices, although a long-term impact on prices is unlikely.

Energy prices continue to work towards carving out a bottom, with a buildup of Turkish troops on the Syrian border and an ongoing strike by Norwegian oil workers, supporting crude values. Without a major event however, the charts suggest we continue to move sideways for now.

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DOE Weekly Report

On June 27, 2012 by TradingDesk
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Another Quiet Morning

On June 27, 2012 by TradingDesk
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It’s another quiet morning in financial markets, with most markets fractionally in the green ahead of the widely anticipate EU Summit tomorrow. However, given that it’s the 20th such summit since the Euro financial concerns started popping up a few years ago, the probability of a major change resulting from the meeting seems somewhat farfetched.

With the calming of financial markets, energy prices have reverted to concerning themselves with potential fundamental issues, most notably a strike by Norwegian oil workers, which could delay shipments to the Brent crude oil hub, and the July 1 embargo of Iranian product. These issues combined to push Brent crude above $93 yesterday, off a low of $88 on Friday, and US products followed along for the ride. WTI was again unable to join in on the rally, and remains stuck below $80 as domestic stockpiles continue to grow. Today’s DOE report will be closely watched to see how Motiva’s 300mb/d $10 billion CDU debacle affected the total refining online in PADD 3. Spot prices have reacted as though the volume wasn’t immediately replaceable, we’ll see what the stats say this morning.

For the near future, RBOB and HO prices seem poised to enter another period of aimless trade, with a fairly wide range between $2.50 and $2.70, with both the charts and fundamental indicators giving mixed signals.

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The Euro Wreaks Havoc

On June 26, 2012 by TradingDesk
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The Euro continues to wreak havoc on global financial markets, with Spain’s official bailout request for its ailing banking sector – which led to a downgrade of its major banks by Moody’s – forced the common currency to its lowest level in 2 weeks, and sparking a wide-spread sell off in stock prices. While the bureaucrats continue to fiddle, global economic activity continues its slow burn, with slumping statistics continue to roll in from Asia, Europe, South America and the US.

The lag in economic activity, and surging oil production, puts global estimates of supply outpacing demand by nearly 1 million barrels each day, a situation last seen in the early 1990s. Despite the crumbling fundamentals, energy prices bounced Monday, led higher by Brent crude rallying back above $90, as fears of escalating tensions in Syria, and on the impact of the July 1st Iranian oil embargo pulled the European grade back from its lowest levels in a year and a half. Technical studies are starting to show bottoming action in both crude and product prices. If a bounce does take place from here, the first major resistance levels are around $2.70.

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Global Stock Markets Trading Sharply Lower

On June 25, 2012 by TradingDesk
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The Euro has dropped below 1.25 vs the dollar this morning, pushing oil prices lower despite the temporary disruptions to production and delivery in the Gulf Coast caused by tropical storm Debby. Forecasts for the storm show that it will continue its idle pace, before weakening and making land fall along the Florida panhandle Thursday or Friday. The storm is not predicted to reach hurricane strength, should not have any lasting impact on oil infrastructure, and poses no threat to Dallas.

With global stock markets trading sharply lower, energy prices are poised to test their lows for the year this week, although July RBOB remains an outlier due to a shortage of reformulated material in the NY Harbor delivery area, which is causing a 35 cent premium over conventional gasoline stocks. $75 will be a major support level for WTI. The major news events for the week will be a NATO meeting tomorrow, to discuss what actions will be taken in Syria, and an EU summit where leaders will continue to face pressure to do something productive as Euro zone countries continue to slip into insolvency.

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Energy Prices Continue To Set New Lows For The Year

On June 22, 2012 by TradingDesk
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A string of negative economic headlines caused an avalanche of selling Thursday, forcing stocks to their 2nd worst day of the year. Overnight manufacturing data from across the globe was joined by rising jobless claims and a weak Philly Fed manufacturing report in the US during the morning. An afternoon call by Goldman Sachs to sell the S&P 500, and later-substantiated rumors that Moody’s would be downgrading the ratings of many large banks, helped accelerate the move. If there was a silver lining in all of this, it’s simply that with all of this news, the selling could have been much worse.

Energy prices continue to set new lows for the year, with crude leading the way as WTI settled below $80 for the first time since September, and Brent settled below $90, for the first time since December 2010. Products have some longer term support layers between $2.44 and $2.50, which is the next likely resting point for prices after this week’s furious selling. If this next layer of support is broken however, the next target on the charts is $2.00.

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Technical View Points To Further Breakdown In Refined Products

On June 21, 2012 by TradingDesk
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The FOMC announced that it would extend its current bond trading program, known as “Operation Twist”, another 6 months through the end of the year, and also set the table for the conditions needed for it to begin a new Quantitative Easing (asset buying) program, known as “QE3”. To put it more simply, the Fed just checked its hand, now we’ll see if the ECB will bet. The lack of an immediate stimulus left markets disappointed, with heavy selling across the board seen immediately after the announcement. Stocks rebounded by the end of the trading session however, cheered by news that the money printing could begin before the end of the year.

Global markets are slipping modestly lower this morning, as Chinese, German, and Eurozone manufacturing data showed that factory activity in each has contracted for yet another month, and as Spain was forced to pay another record high yield to issue new 5 year debt.

While stock markets have performed well over the past week, energy commodities have taken another beating, and are again trading at their lowest levels of the year, with WTI trading below $80 overnight. The correlation between stocks and energy prices over the past several years has been extremely strong – often over 90% – so this recent disconnect bears watching, as it will likely dictate where we go from here. On a purely technical standpoint, we’re facing a breakdown in prices, that should send refined products down another dime in the near term.

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DOE Weekly Report

On June 20, 2012 by TradingDesk
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Fed’s Policy Announcement Due Today

On June 20, 2012 by TradingDesk
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The much anticipated policy announcement by the Federal Reserve’s Open Market Committee (FOMC) is, finally, due out today at 11:30 am. Stocks have rallied over the past several sessions in anticipation that some new form of stimulus will be announced, while commodity markets haven’t moved, suggesting that some traders aren’t convinced that anything major is pending. Past programs, QE1/QE2/Operation Twist, have pushed the US Dollar lower, and risk assets – most notably stocks and commodities – sharply higher, although each new program has had less effect than the last. While it may be disagreeable to some that markets become so fixated on a central bank, it’s hard to argue that there has been a larger driver in market prices over the past 3 years than FOMC policy.

While we wait, the DOE report will come out at 9:30, and is expected to show small gains in refined products and a small draw in crude stocks. The refinery run and export figures will continue to be the most important drivers of price action, as plants ramp up to capture good margins in most locations, and as cargo ships race to distribute the excess supply to foreign buyers. News that Motiva’s new 300mb/d crude unit may be shut for as long as a year will be closely watched over the next few weeks, as no one is quite certain if other plants are ready to pick up the slack.

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