Energy Prices Continue With Half-Hearted Gains

On September 17, 2012 by TradingDesk
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US futures markets are taking a breather this morning, trading essentially unchanged after last week’s furious FED fueled rally sent major stock indexes to their highest levels in 4 years. Flaring tensions between China and Japan over disputed territory has set a cautionary tone, as investors fear the impact this may have on the regions 2 largest economies.

Meanwhile, energy prices continue with half-hearted gains, despite a broad military exercise practicing removing mines from the Straits of Hormuz in case Iran tries to block the strategic waterway. WTI and HO technical studies continue to point higher, while RBOB is rolling over into bearish territory. With middle east tensions building, and central planners clearly willing to act, speculation continues that governments may soon release strategic petroleum reserves onto an already saturated market.

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A Sell Off Risk if Fed Chairman Doesn’t Deliver On Expectations

On September 13, 2012 by TradingDesk
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There’s a Federal Reserve announcement coming today, so naturally markets are already reacting to rumors and false headlines, which has helped a little volatility return to what have been very quiet markets over the past month. Markets have been moving higher in anticipation of today’s event, so the risk of a sell-off if Chairman Bernanke doesn’t deliver on those expectations is severe.

Energy prices markets are conflicted, with WTI and HO both showing bullish tendencies, but RBOB looking like it has in fact put in its highs for the fall, after a 7 cent reversal yesterday following the DOE report. Tensions in the middle east continue to grow, so unless equities sell off heavily, look for Crude and Diesel values to drag a reluctant gasoline contract higher. HO is currently just 7 cents away from its highs for the year.

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DOE Report

On September 12, 2012 by TradingDesk
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Markets are on the Edge this Morning

On September 12, 2012 by TradingDesk
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Markets are on the edge of a breakout to the upside this morning – with the Euro reaching a 4 month high after German courts allowed participation in the Eurozone bailout funds – but they’re also on edge following the murder of an American ambassador in Libya, and as US and Israeli leaders appear to be distancing themselves from one another over the Iranian nuclear issue. The FED begins its FOMC meeting today, and expectations have been raised again that they will produce some sort of stimulus, which is adding to the bullish feel today.

Both RBOB and HO have hit their highs for the month overnight, and appear poised for higher prices, although WTI is acting as a drag, having returned to unchanged after an overnight bounce. $3.20 is the next target for RBOB futures, and the 2012 highs in the low $3.30s appears likely if HO can settle over $3.20 today. If however, futures fail to push higher in the face of all this bullish news, that will probably be the sign we’re looking for that the seasonal peak in product prices is very near.

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Stage Set For Increased Market Volatility Tomorrow

On September 11, 2012 by TradingDesk
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It’s another extremely quiet trading day so far, after another low volume Monday. There are several reasons for the lackluster moves – natural consolidation following a furious 2 month rally, waiting on the FED’s announcement Thursday, and 9/11 memorials today. The stage is set for increased volatility beginning tomorrow, when Germany decides on the legality of the bailout plans in place for Europe.

Fundamental supply news has a little something for everyone today, with Israel stepping up its war of words with Iran, and OPEC suggesting that the world is oversupplied with oil. Likewise, technical studies are mixed, with a bullish flag formation possibly being created in WTI and HO, yet reluctance to confidently move higher is seen daily, with HO breaking $3.17 only to sell off if 5 of the last 7 trading sessions.

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Energy Traders Waiting For The Next Event To Provide Direction

On September 10, 2012 by TradingDesk
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Friday’s jobs report sparked much debate over whether the lag in hiring will prompt the FED to act. Meanwhile, the Chinese Central Bank did act, announcing an infrastructure building plan that is projected to add $1 trillion in new spending. The move buoyed energy markets, since it seems this may stem the recent decline in commodity imports from the world’s largest buyer.

While we probably won’t receive word on any potential for FED action for several more weeks, we will see a ruling on European bailout funds by Germany’s supreme court, which will likely set the tone for the Euro for the next few months.

Trading volumes in energy commodities continue to be very light, as crude and product contracts consolidate, and traders wait for the next event to provide direction. Technical studies remain stuck in neutral, with $3.20 still the key barrier to the upside, and the $3.00-$2.90 range providing support.

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Commodity Markets Not Convinced Latest ECB Plan Is The Solution to 3 Year Struggle

On September 7, 2012 by TradingDesk
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Stock markets rallied sharply Thursday, cheered by the bond buying program announced by the ECB. The announcement has caused Spanish and Italian debt yields to drop sharply, as investors breathe a sigh of relief that the countries won’t run out of cash, and has pushed the S&P 500 to its highest levels since before the credit crisis in 2008. Energy prices rallied most of the day in sympathy, but gave up almost all of those gains in the afternoon, suggesting commodity markets aren’t quite convinced that this latest plan is the solution to a 3 year old struggle.

 

EMPLOYMENT

This morning’s jobs report showed another month of weak job creation, with only 96,000 jobs created, but the unemployment rate still dropped to 8.1%, as labor force participation dropped to its lowest since 1981. The market reaction to the report has been choppy, with an immediate sell-off on the news, followed by a bounce back to pre-announcement levels.

CLICK HERE for a copy of this morning’s jobs report

CLICK HERE for a household breakdown of labor data

ENERGY

Energy prices wiped out overnight gains following the report, but 10 minutes later have spiked to their highs for the day, as bets are being thrown down that this report supports a case for the FED to provide new stimulus. HO and RBOB need to make a break above the $3.20 range to support a case for extending their 2-month old rally

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API Report Shows 7.2MM Barrel Drawdown In Crude Stocks

On September 6, 2012 by TradingDesk
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European Central Bank president Mario Draghi is giving a press conference at the moment, describing some details of the bond buying program (soon to be known as “OMT”) that he promised a month ago to provide stability to struggling countries in the Eurozone. Stock and commodity markets have been fluctuating rapidly as he speaks, as traders instantly bet on the course this program will lead markets. As we’ve seen with major Federal Reserve announcements however, it often takes a day or so for the final judgment on a program to be passed, so for now we’ll just have to watch the show.

Last night’s API report showed a 7.2 million barrel drawdown in crude stocks, reflecting the impact of Hurricane Isaac. Similar figures are expected in today’s holiday-delayed DOE report, with refining throughput the number to watch for, to see how much production was actually shut down due to the storm. Speaking of Isaac, some of the storm’s remnants have reformed over the Gulf of Mexico, and are given a 40% chance of developing into a tropical depression in the next few days, with Florida the most likely target for a new landfall.

Technical studies remain stuck in neutral, and while today’s DOE report may cause some ripples in the gulf coast spot market, futures prices seem content to follow the ECB.

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Still Too Early To Say Fall Energy Prices Have Hit Highs

On September 5, 2012 by TradingDesk
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Weak manufacturing data across the globe, notably 3-year low PMI readings in Germany and the US, have set a bearish tone for the week, and most stock markets are pointing to a lower open today. Meanwhile, the Euro/USD has broken back above 1.26 on news that the ECB is stepping in to buy bonds to support a struggling financial sector, which has limited the selling so far.

Energy prices are showing signs of rolling over, with technical studies – which were bullish through most of the past two months’ 65 cent rally in products – finally showing signs of topping out. While we are now in the window of seasonal peaking for product prices, it is too early to say that we’ve seen our highs for the fall. HO will need a decisive break below $3.10 and RBOB needs to drop below $2.90 before any serious sell-off can begin. $3.20 provides critical resistance for both products.

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Energy Prices Showing Signs Of Waning Momentum

On September 4, 2012 by TradingDesk
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Global markets are mixed this morning, with PMI data from China and Europe showing continued contractions in activity and after Moody’s threatened to downgrade Spanish debt yet again. On the other hand, Ben Bernanke left the door wide open for a new type of stimulus program from the FED, and Mario Draghi continued his pledge for ECB bond buying to boost the struggling markets.

So, as we enter the fall, the major 2012 theme of economic concern facing down central bank optimism continues. Energy prices are beginning to show signs of waning momentum, following a 2 month rally that has pushed futures prices 65 cents higher. Charts continue to favor higher prices for the near term, but absent a major supply disruption, look for product prices to top out for the fall over the next several weeks.

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