Anticipation Pushes Energy Prices Through Near Term Resistance Levels

On July 17, 2012 by TradingDesk
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Most global markets are heading higher this morning, with many optimistic that Ben Bernanke will hint at more quantitative easing during his congressional testimony today, and on signs that the Chinese central bank may also be ready to act again to limit the economic slowdown they’re experiencing. It’s impossible to say how the FED Chairman’s speech will go today, but there is an argument that 2012 is shaping up very much like 2011, and that the ball will be placed in congress’s court to act on the fiscal side of the ledger, since the monetary policy has already been tried.

While the gains so far are not spectacular, they have pushed energy prices through their near-term resistance levels with products now poised for their 5th straight day in the green. With bull-flag patterns visible in both RBOB and HO, the next target to the upside come in the range of $3, which is consistent with the typical late-summer to early fall rally in products.

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Refined Products Continue Aimless Trade

On July 16, 2012 by TradingDesk
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Refined fuel markets are continuing their aimless July trade this morning, without a major catalyst in equity or currency markets to provide direction. Technical studies continue to favor higher prices over the near term, with a break above resistance in the $2.80 range setting up a move to $3 by the end of summer. Without this breakout, we are setting the stage for several more weeks of range bound trading.

While gasoline prices stagnate, ethanol prices continue on their huge corn-driven July rally, gaining another dime this morning, and standing 55 cents higher than at the beginning of the month. With the Midwest drought drawing comparisons to the dust bowl, and ethanol plants shutting their doors due to negative margins, these prices appear able to continue heading higher.

The macroeconomic story continues its pattern of slow growth, today showed a third straight month of dropping retail sales in the US, and a weak NY FED manufacturing index. Germany is delaying a vote on the Spanish bank bailout, which pushed the Euro to a fresh low after rebounding Friday. Tempering the economic concerns are renewed hopes that global central banks will continue their stimulus activities, with all eyes again turning to Ben Bernanke, who will testify before congress tomorrow on the FED’s monetary policy.

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Fresh Sanctions Push Prices Higher

On July 13, 2012 by TradingDesk
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A new round of economic sanctions on companies with ties to Iran, combined with a recovery in the US stock market Thursday afternoon, sent refined product prices bouncing 7 cents off their early morning lows. The move pushed prices through near-term resistance on the charts, and we currently sit at our highest levels of the month. If prices can hold above this range heading into the weekend, charts point to a move towards the $2.86-$2.90 range over the remainder of the month.

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Red Day Across the Globe

On July 12, 2012 by TradingDesk
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We’re looking at a red day across the globe, after hopes for more FED stimulus were dashed yesterday afternoon when the minutes from the latest FOMC meeting gave no hint of another round of quantitative easing. Stock markets in Asia and Europe are selling off heavily, the Euro is again setting new 2 year lows, and both the DJIA and S&P 500 are poised for their 6th straight day of losses.

While energy prices have performed much better than most stock markets so far in July – with supply disruptions overseas helping to offset the more typical correlations between the two – there are signs beginning to appear that the lows from June may be tested again in the near future. The International Energy Agency (IEA) lowered its global oil demand forecast, due to the weakening economic outlook across the globe. In addition, the failure by RBOB and HO futures to break technical resistance in the $2.75-$2.80 range now sets us up for a test of support from $2.65-$2.70. A break at these lower values suggests we’ll try again to sell off to $2.50.

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DOE Weekly Report

On July 11, 2012 by TradingDesk
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The Battle Continues

On July 11, 2012 by TradingDesk
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Energy futures remain stuck in their recent trading ranges, and seem to be buying time until the next major move in financial markets provides additional direction. With both the EUR/USD and US stock markets on the edge of a major technical breakdown, the remainder of this week should go a long way in deciding our path for the summer.

As the running battle between a slowing global economy and central bank action continues, all eyes will focus this afternoon on the minutes of the latest Federal Reserve meeting, looking closely for any hints that more stimulus is on the way. If a case can be made that another round of Quantitative Easing may be announced in August, expect a large rally similar to what we saw in the summer of 2010.

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Technical Studies Remain Mixed

On July 10, 2012 by TradingDesk
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Energy prices are slipping this morning, as the Norwegian government averted a strike-induced shutdown of its oil production, and as Chinese import data for June came in much lower than expected. Technical studies remain mixed with slight favor given to higher values, although yesterday’s failure to hold on to an afternoon rally shows a distinct lack of conviction among traders.

European equities have surged overnight as hopes that the bailout fund known as the ESM would pass Germany’s parliament, and on news that Spain was given another year to reach its deficit reduction targets. Currency markets are more skeptical, however, with the EUR/USD remaining near a 2 year low, which is holding US Stocks in check at the moment.

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Lack of Jobs and Stimulus Disappoint Equity and Commodity Markets

On July 9, 2012 by TradingDesk
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After Friday’s jobs report disappointed both those looking for an improving labor market, and those hoping for additional monetary stimulus from the Federal Reserve, stocks and commodity markets sold off heavily, wiping out most or in several cases, all of the gains earned earlier in the week. This morning the focus has shifted back to Europe, with the Euro/USD trading near a 2 year low on renewed debt concerns in Spain and Italy. Statements by Chinese central bankers suggesting more stimulus was on the way there has kept the selling to a minimum so far.

Energy prices continue to be aided by supply disruption concerns out of Norway, as that country braces for the first complete shutdown of oil production in more than 25 years. As Brent Crude is aiming to get back above $100, US products are struggling to break out to the upside, suggesting any supply concerns are seen as short term concerns. Technical studies are mixed, but give a slight advantage to bullish bets, with a test of the high end of our recent trading ranges, near $2.80 for both products, a definite possibility.

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Crude And Refined Products Down Across The Board

On July 6, 2012 by TradingDesk
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Crude Oil and Refined Products are down across the board this morning, with RBOB and HO both right in the middle of the support and resistance levels.

The June Non-farm Payroll number of 80,000 came in below expectations of 100,000. Private payrolls missed even worse, at 84,000 below consensus of 106,000. The unemployment rate came in at 8.2%, which was in-line with expectations; while the broad unemployment rate (U-6) rose from 14.8% to 14.9%. The lower pace of job creation over the past three months falls well short of what’s required to reduce the unemployment rate to precession levels. The economy would have to add 250,000-plus jobs each month for several years to trim unemployment to around 6%.

About 2 weeks ago, Fed officials said they would buy securities to extend the maturities of assets on the bank’s balance sheet (Operation Twist). The language the policy makers used when announcing those new measures was that the Fed is “prepared to take further action as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions.”

Is this disappointing unemployment report bad enough news for more QE? Stay tuned…….

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After An Early Morning Push, Crude Oil Futures Down

On July 5, 2012 by TradingDesk
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After an early morning push upward across the board, crude oil futures are down $.85 bbl, while refined products are mixed. RBOB is up $.015 at $2.74, with overhead resistance around $2.785, while HO is trading down at $2.745, well below resistance levels.

As the US has increased its military presence in the Gulf region, the commander of the Iran’s Revolutionary Guard air force said on Wednesday that missiles had been aimed at US military bases in the Gulf as well as targets in Israel, to be launched in case of an attack.

US Initial jobless benefits declined by 14,000 last week to 374,000, the lowest level in six weeks. Continuing claims rose 4,000 to a seasonally adjusted 3.31 million in the week ended June 23.

The ADP Private Jobs report shows that in June America created 176K private jobs, better than expectations of 100K, and up from last month’s 136K revised print.

Europe’s major central banks delivered a further round of monetary stimulus, with the European Central Bank cutting its key lending rate to a record low and the Bank of England embarking on additional quantitative easing. The ECB said its governing council voted to cut its key lending rate by a quarter of a percentage point to 0.75%, taking it below 1% for the first time in the central bank’s history. The central bank also cut the deposit rate, which it pays on funds parked at the ECB overnight, to 0% from 0.25% and lowered the rate on its marginal lending facility from 1.75% to 1.5%. The moves were in line with expectations.

The moves from the ECB came on the heels of China’s central bank surprising move to cut its benchmark lending and deposit rates.

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