The Volatility Remains The Same

On September 28, 2012 by TradingDesk
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Nymex RBOB futures continue to provide the most interesting headlines this week, and yesterday’s 12 cent spike was cut in half (and some physical markets actually ended the day trading lower) the volatility remains as the contract has already jumped by over a nickel this morning. Meanwhile, European energy products continue to lead advances in crude and diesel, with Iran’s sabre rattling taking most of the blame, although Israel’s UN speech yesterday has suggested to many that an attack won’t happen before the US elections as has been feared.

With a 26 cent backwardation in RBOB futures from October to November, charts are setting up with a double-top pattern suggesting that we have in fact witnessed the fall peak in gasoline prices, and should begin a drop that typically ranges 20-30% into the winter months before rising again in the spring.

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RBOB Explosion!

On September 27, 2012 by TradingDesk
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News yesterday of an explosion at the St. John refinery on the east coast of Canada shook a quiet market awake with a sudden price spike in RBOB futures – since roughly half of the plant’s capacity ends up being imported into the NY Harbor market. Word that the explosion was in a non-operating unit, and would have little, if any, impact on supplies tempered the move only briefly, and the contract is off to the races again this morning, and currently stands 35 cents higher than a week ago. Rumors are circling that a major trader is caught in a massive short squeeze that’s exacerbating the runaway train affect. With expiration of the October contract just a day away, don’t expect the action to slow until next week.

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DOE WEEKLY REPORT

On September 26, 2012 by TradingDesk
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Global Equities and Commodities Heading Lower

On September 26, 2012 by TradingDesk
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Global stock markets, along with most commodities, are headed lower this morning. Some Asian indexes hit multi week lows as the dust up over disputed territory continues to damage trade between China and Japan. The Euro is also sliding, as anti-austerity protests in Greece and Spain bring concerns about the fractured system after months of hope that the ECB had saved the day. Likewise, US markets were upset late yesterday, after one of the FED governors threw cold water on their recent stimulus activities, suggesting they may not boost economic growth.

WTI and HO are both heading lower, while RBOB is holding onto gains, reflecting some short term supply disruptions in the New York Harbor as the October contract nears expiration. If WTI breaks below $90, a sharp sell-off aiming for support in the $85 range over the next week or two appears likely.

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Grasping At Straws

On September 25, 2012 by TradingDesk
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Manic market action continues to be the rule, as energy markets have already wiped out yesterday’s losses, after technical support held below the market yet again. The same headlines are being recycled depending on market direction, yesterday it was a weaker Euro and easing supply concerns that pushed prices lower. Today, it’s a stronger Euro and concerns that Iran will cause supply disruptions that is pointed to. The bottom line is traders, and reporters, seem to be grasping at straws.

Until energy futures break out of their ranges, $2.80-$3.00 for RBOB, $3.05-$3.20 for HO, and $92-$100 for WTI, expect the choppy action to continue.

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Refined Products May Be At Highs For The Fall

On September 24, 2012 by TradingDesk
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Market UpdateEquities and commodities across the globe are slipping this morning, following a weak Euro lower on news that France and Germany are disagreeing on how to handle EU bailouts. Weak economic readings from China and Germany are also adding to the negative sentiment.

Refined product futures are back in the middle of their September trading range, with little direction indicated by the charts. We are in the fall peaking window for prices, and if RBOB fails to get back above resistance at $3.00, and $3.20 for HO, we may have already seen our highs for the fall and would expect a drop in the range of 20% through the winter.

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A Wild Week of Trading

On September 21, 2012 by TradingDesk
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A wild week of trading appears ready to end in style, with RBOB futures already up more than a nickel on the day, and up 15 cents from Wednesday’s lows. HO is “only” up a dime from its weekly lows after a 25 cent tumble.

Looking ahead, energy values have moved into neutral territory setting up trading ranges between $3.00 and $3.25 for HO, and $2.80 and $3.05 for RBOB, with little direction pegged by technical studies. Fundamentally the market remains mixed as well, as economic weakness continues to face off with Middle East tensions for control of the market.

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Widespread Global Equity Selloff With Refined Products in US Modestly Up

On September 20, 2012 by TradingDesk
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Weak economic data overnight from China, Japan and Europe has sparked widespread selling in stock markets across the globe. Meanwhile, refined products in the US are up modestly, following a 20 cent drop in the first half of the week. With technical studies quickly rolling into bearish territory, target $90 for WTI, $3.00 for HO and $2.80 for RBOB as critical support. If we fail to hold above these levels, another 20 cent drop in product prices may be in the cards.

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Energy Prices Continue To Follow Through On Selling

On September 19, 2012 by TradingDesk
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Energy prices have followed through on Monday’s selling, dropping more than 1% Tuesday, and are currently sitting very near the chart support levels established during the rapid sell off. If we trade below these levels, the next major targets are $3.00 for HO and $2.80 for RBOB.

The fundamental picture remains conflicting, as concerns over Iran have been tempered by news that Saudi Arabia is now pumping more crude than it has in nearly 30 years, and the global market remains well supplied.

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Three Weeks Of Energy Gaines Wiped Out In A Minute

On September 18, 2012 by TradingDesk
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The major story Monday was a rapid plunge in energy prices that wiped out 3 weeks of gains in less than 1 minute, and left the market asking “what just happened?” There were not any major supply announcements (despite lots of rumors of a Strategic Petroleum Reserve release) and the CFTC said they would not be cancelling any trades, suggesting it was not a “fat finger” or other mistaken trade that caused the wild swing.

It may simply be that the market has been trading on very light volume for several weeks, and we had a very high amount of “noncommercial” (speculative) interest in the market, as is shown in the 1st chart below.

So, it appears that when a big volume order hit in a very short period of time, the market just wasn’t able to handle it right away, although it did recover in a few minutes. The 2nd chart shows the day’s trading broken down into one minute increments. As you can see, the HO contract dropped 8 cents in 1 minute, only to bounce back over the next 2 minutes. The speed of that move suggests that high-frequency trading algorithms were involved, although it’s impossible at this point to say if they were the cause.

What we do know is that the bounce following the selloff sets up strong chart support, at $2.86 for RBOB, $3.09 for HO and $94 for WTI. With tensions building in the middle east, it seems that breaking below these levels is unlikely, but if yesterday’s move prompts the “hot money” speculative interest to head for the exits, all bets are off.

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