Refined Products Stuck In Trading Range With Ethanol Climbing

On July 31, 2012 by TradingDesk

The pre-central bank meeting tailgate party continues today, with markets barely moving. The real action should begin tomorrow afternoon, and history suggests that we’ll drift higher ahead of that news.

While refined products are stuck in their trading ranges, agricultural commodities continue to push to record highs as the damage to crops across the country continues to be evaluated. With this move, ethanol is becoming more expensive than gasoline in many markets, and the combination of high prices for food and fuel is sparking a new round of calls for the end of the RFS.

The Enbridge pipeline leak that forced several crude oil lines to shut over the weekend, and sent Chicago gasoline prices up more than a dime yesterday, should be completely repaired and all lines restarted today.

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Energy Prices Remain In “Wait and See” Mode Pending Central Banks Actions

On July 30, 2012 by TradingDesk

It’s Monday of central bank week, and markets are biding their time, waiting for the announcements from the US FED (Wednesday) followed by the European Central Bank (ECB) and Bank of England (BOE) Thursday. After last week’s comments by the ECB president sent US Stocks up 3.5% in two days – to their highest level since the sell-off in Early May – most global markets are taking a small step back today. The Euro is dropping after reports showed that Spain is slipping deeper into recession (GDP declined .4% in the 2nd quarter) and doubts began to surface that Super Mario could back up his pledge to save the Euro.

Energy prices remain stuck in “wait and see” mode, with buyers hesitant to hold product prices above $2.90 and WTI above $90. While the seasonal trend to rally into September, and tensions in the middle east continuing to escalate give a slight edge to higher prices, this remains a market obsessed with the banks, and this week’s announcements will likely trump all other factors.

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Testing July Energy Highs Possible

On July 27, 2012 by TradingDesk

US GDP for the 2nd quarter was just released, and beat the consensus estimates, with grown seen at 1.5% and the 1st quarter was revised higher to 2%. This is not a great performance, but it is certainly good news that our economy continues to grow despite all of the challenges – domestically and abroad – that we’ve faced this year.

So, why have markets wiped out their overnight gains after this report, shouldn’t they be moving higher?

The simple answer is that our markets are fixated on central bank action. A positive GDP report makes it less likely that the FED will announce any more stimulus measures in their FOMC statement next week. Meanwhile, yesterday’s announcement by the European Central Bank that they were ready to save Europe, is still rippling through markets across the globe, helping to maintain bullish momentum for now.

Energy Prices are back into neutral territory technically, with a slight favor given to higher prices, with a test of our July highs possible. Some caution is warranted given the similarities between this year and last year’s price action, that August is set to be a wild month. Last year saw 50+ cent swings in product prices, and a $23 move in WTI crude.

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Long Awaited Positive News Sets Table For Upward Moves

On July 26, 2012 by TradingDesk

After a choppy, mixed action day Wednesday, most global markets are surging higher this morning following a statement by European Central Bank President “Super” Mario Draghi that officials were ready to act to keep the Euro Zone alive. Details were not given, but it was suggested that buying Spanish and Italian debt, to lower their crippling borrowing costs, is a likely first step. We’ll have to wait and see if this plan works better this time than the last.

The US has also stepped up this morning with 2 bits of good economic news, with weekly unemployment claims dropping sharply (the caveat provided was that tracking this month is skewed by the opening and closing of auto plants switching to new model years) and durable goods orders increasing more during the past month than most forecasts. With technical support having held after Monday & Tuesday’s large selloffs, the Euro surging by the most in a month, and some long awaited positive news for the economic front, the table is set for a significant move up today. The actual performance will say a great deal about the longer term mood of the market.

Energy prices tried to sell off following a bearish DOE report yesterday morning, but bounced sharply into the close and have carried their momentum through the overnight session. With good support now established in the $2.70s for both products, signs point to prices trying to test the upper end of our July range again, targeting $2.95 for both products.

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Energy Prices Moving Higher

On July 25, 2012 by TradingDesk

Most markets are pointed higher, recovering from a third straight day of selling, following a Wall Street Journal article that suggesting the FED was getting closer to action, and a member of the European Central Bank said it was time to add more dollars to their bailout fund. The Euro has bounced after setting another 2 year low yesterday, and US Treasury yields are gaining ground, as investors seem ready to peak their head out now that the 3 day storm of selling has passed.

Energy prices are moving higher, although the first two RBOB contracts remain in the red, as a major correction in what had been record high time spreads for gasoline continues to shake out. Physical supply for reformulated blends in the NY Harbor – where the gasoline futures contract settles – had been extremely tight, and now that product appears to be more readily available, we’re seeing a bit of reality set in on the futures. Support levels have held so far, and with equities pointing up, it seems likely that energy contracts will try and resume their typical seasonal rally.

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Energy Prices Sitting Near Key Short Term Support Levels

On July 24, 2012 by TradingDesk

We’re looking at another red day almost across the board today, as European worries continue to fester after Moody’s downgraded the outlook for all but one of the remaining AAA rated countries – most notably Germany – and the purchasing managers index (PMI)for the Eurozone showed another month of shrinking growth. Likewise, China’s PMI showed another month of contraction, although its reading was the best in 4 months.

With bonds in “risky” countries such as Italy and Spain trading at or near record highs, while bonds for “safe” countries like the US and Germany trading at record lows this week, what is remarkable is that the US stock market continues to hold its bullish trend-line for now. Whether or not this Teflon style trading can continue will likely be a huge contributor to the outlook for energy prices, which still maintain a strong correlation to the major stock indices.

Energy prices are currently sitting near key short-term support levels, after yesterday’s big sell off, and if the overnight sell-off can hold up throughout the day, we’ll be targeting numbers in the low $2.70s over the next week.

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European Debt Takes Center Stage Again

On July 23, 2012 by TradingDesk

The European debt crisis has taken center stage yet again, with Friday’s sell-off being dwarfed by today’s move. Spanish 10 year bonds are at a record high over 7.5% after the latest GDP reading showed a 3rd straight quarter of economic contraction. Greece is making headlines again, as it appears unlikely that they will qualify for their next round of bailout funding. With the negative headlines, the Euro has fallen below 1.21 dollars for the first time since June 2010, and is dragging most markets down 1-3%.

Refined product prices are down nearly a dime, moving in sympathy with financial markets despite rising tensions in the middle east. While the run towards $3 has failed for RBOB and HO, it is too early to say that the rally is finished, with a break below support in the $2.80-2.85 range needed to confirm a reversal.

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Energy Prices Take A Summer Break

On July 20, 2012 by TradingDesk

Energy markets are selling off today, taking a break from a month long rally that has pushed RBOB and HO futures up over 40 cents. The question now becomes whether today’s move is just a natural correction following a relentless move upward in 4 weeks, or was the last month’s rally just a correction of the larger sell-off that started in April. The first test will be support in the $2.87-$2.88 range, if we hold there, expect the seasonal rally to continue.

Protests in Spain over the bank bailout/citizen austerity package being put in place has stoked the coals of concern in Europe that had cooled somewhat in recent weeks. The Euro has broken below 1.22 vs the US dollar again, which is dragging stocks around the globe lower today.

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Energy Prices Continued Bullish Technical Breakout Yesterday

On July 19, 2012 by TradingDesk

Energy prices followed through on their bullish technical breakout Wednesday, and the buying has picked up steam overnight, after Iran was accused of a terrorist attack on Israeli tourists in Bulgaria, and the US was quietly moving another aircraft carrier into the Straits of Hormuz.

Although 2 days of testimony by Ben Bernanke produced nothing in the way of an action plan from the FED, equity markets continued to rally, and the Euro has bounced back from a 2 year low, all of which are helping to boost commodity prices. If the long term average 30% summer-fall rally in refined product prices is produced this year, off of a June low in the $2.50 range, RBOB and HO futures are heading back towards the $3.30 range by September, with resistance in the $3.00 range the major hurdle to cross in the short term.

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Refined Products Have Broken Above The 38% Retracement of Spring Selloff

On July 18, 2012 by TradingDesk

Once again, testimony by the FED chairman threw markets for a loop Tuesday, with the press release of his testimony sending markets US equities lower by 1% or more, only to recover later in the afternoon as every syllable was parsed for a hint that more QE was on the way. He’s back on the hill again today, and while no major news is expected from his testimony, the manic behavior is likely to continue as long as the uncertainty surrounding their policy decisions remains.

Energy markets had a mixed day, but maintained their recent upward trend. Both HO and RB pulled back after making early runs at into the upper $2.80 range, and charts continue to move further into bullish territory. Products have now broken above the 38% retracement of their spring selloff, with the next natural retracement level coming in around the $3.00 range.

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