Market Stuck in a Trading Range for the Time Being

On October 16, 2012 by TradingDesk
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We have the mirror image of yesterday’s action taking place this morning, with RBOB futures up, HO down and WTI flat once again. Technical support levels held up through heavy selling yesterday, most notably in WTI which bounced $2 off of its 100 day Moving Average. The rebound proved again that the market is simply stuck in a trading range for the time being, with little indication of direction going forward.

The Euro is leading global stock markets higher this morning, after a news report that Germany was “open” to a new bailout credit line for Spain. This may have the most significant market influence today, but the biggest story is that Citigroup’s CEO Vikram Pandit has resigned without warning, just a day after the company’s stock surged 5% following its quarterly earnings report. While there is no direct correlation to the energy market, it does stir concern that all is not well in the financial sector, which could have negative implications across stock and commodity markets.

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Charts Giving Little To No Direction

On October 15, 2012 by TradingDesk
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There’s a little something for everyone in the energy markets today, with RBOB futures falling again, HO futures slightly higher, and WTI unchanged.

Charts are giving little to no direction for prices going forward, so we’ll continue to wait for a winner in the supply stare down to see where we go heading into the winter. Historically, we should see a substantial pull back in prices over the next few months.

Chinese Export and US retail sales data came in better than forecast this morning, which has helped reverse overnight losses in stock markets, and put an end to most of the selling in commodities as well. A Reuters article referencing unconfirmed reports that Iran is planning an oil spill in the Straits of Hormuz has also helped put a bid under HO and WTI.

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Refined Products Selling Off Heavily

On October 12, 2012 by TradingDesk
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Refined products are selling off heavily this morning, following European energy products lower after a report from the International Energy Agency (IEA) lowered global oil demand estimates for the next 5 years due to weak economic activity.

WTI is unchanged so far, as there appears to be heavy spread liquidation taking place, most notably in time spreads for RBOB – the Nov/Dec spread is currently trading at .07, down from .16 a week ago – and crack spreads in HO, which are down over a dollar/barrel from yesterday’s record high near $45 for the November contract.

Without any new headlines from the Middle East, and after failing to break resistance on the upside, products are set up to test the lower end of our recent trading ranges, with $2.80 and $3.00 the must-hold levels for RBOB and HO respectively.

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Middle East Tensions Support Energy Prices Despite Broad Equities Selling

On October 11, 2012 by TradingDesk
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Middle East tensions continue to keep a bid under the energy market, despite broad selling in stock markets across the globe.

While Iranian supply threats tend to grab most headlines, the capture of a Syria bound plane from Moscow laden with materials to help Assad’s war effort yesterday may signal a greater threat to actual oil supply than that of the middle east producers. Russia, which until recently had outpaced the Saudis in crude output, is now struggling through a period of declining production, giving their government some incentive to hold global prices higher.

The RBOB curve is falling, with the November contract the only major energy contract in the red this morning, as refineries are coming back online, and winter grades ease the short term supply squeeze along the east coast. With its failure to sustain a break above the 200 day MA yesterday, charts suggest that RBOB will move back to the low $2.80s. Meanwhile, HO and WTI are testing the upper ends of their trading ranges. If HO can break through the cluster of resistance in the mid $3.20s, expect a quick move to test the year’s highs.

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Words of War vs. Ample Supply Tugs On Energy Prices

On October 10, 2012 by TradingDesk
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Escalating violence between Syria and Turkey was pointed to for Tuesday’s strong action in energy markets, which managed to shrug off sharp selling in equities. Although neither nation is a major producer, the concern is that the fighting spills over to other nations in the region. As if on cue, Israel’s push for an early election was also a factor in the price increases yesterday, as some are viewing this as a precursor to war with Iran.

Meanwhile, in the bearish news camp, OPEC has released a report showing that the global markets are well supplied, and will likely remain so through next year. Also, the IMF’s war of words against the Euro zone continues to send shivers through stocks across the globe, which are largely in the red again today.

Energy prices are now near the upper ends of their trading ranges, although charts are showing signs of topping out, so it’s likely that products will need some catalyst to finally break them out of their choppy, sideways pattern.

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A Mixed Day So Far

On October 9, 2012 by TradingDesk
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It’s a mixed day so far for risk assets across the globe. The headline dominating the news was the economic outlook by the International Monetary Fund (IMF) which stated that risks of a global slowdown were “alarmingly high”, which has helped push many European markets in the red. Meanwhile, liquidity injections by the Chinese central bank have sent many Asian shares higher. So, once again we get front-row seats for the stare-down between economic challenges and central bank action.

Energy prices are bouncing after Saudi Arabia’s Oil Minister signaled that their efforts to stabilize oil prices had been successful. The assumption then becomes that they are done raising output, which has helped US and European grades to rise roughly 1% on the day. With both RBOB and WTI bouncing off of the lower edges of their recent trading ranges yesterday, the door is open to test the upper ends now, with technical studies conflicting each other. Resistance comes in at $3.00 for RBOB, and the low $3.20s for HO.

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Energy Values Remain Mixed

On October 8, 2012 by TradingDesk
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Global stock markets are trading lower this morning, modestly, less than 1% in most places, after the World Bank cut its forecast for Chinese economic growth.

The Euro is also helping to lead commodities lower, as their bailout fund is launched today, and some skepticism remains about its effectiveness.

Energy values remain mixed, with WTI crude shaping up for another sell-off, while RBOB and HO remain in neutral territory, following the lead of European fuel grades. While there has been a great deal of hype over the tightness of gasoline supplies – particularly in California this past week – issues have been very limited geographically. With a flood of higher RVP product on its way, don’t expect these concerns to keep prices elevated for long.

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Jobs Report Sends Commodity Prices Up

On October 5, 2012 by TradingDesk
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The US non-farm payrolls report showed an increase of 114,000 jobs, putting the September unemployment rate at 7.8%. The news has sent commodity prices bouncing from their overnight lows, with RBOB once again leading the way, up more than 4 cents, after a 14 cent spike Thursday.

Exxon remains quiet on the status of its Baytown refinery, while they’ve confirmed that Wednesday’s fire will have “some impact” on operations, it is still unknown which units are shut, and what the production losses may be. What’s interesting is that although the price spike following the news was dramatic in the US, with both RBOB and HO up 4-5%, it was even more so on European grades, proving again that the US’s newfound role of refined product exporter is taking hold.

With some “good news” from the jobs report, and supply concerns still looming, look for products to test resistance in the near term, now that the week’s losses have been erased.

CLICK HERE for a link to the jobs report      CLICK HERE for a PDF of the HOUSEHOLD DATA

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Energy Futures Roaring Back

On October 4, 2012 by TradingDesk
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A refinery fire at Exxon’s plant in Baytown Texas, and a bunch of hot air from the ECB’s chairman Mario Draghi, have sent futures soaring this morning, wiping out all of yesterday’s losses. The fire has been extinguished at the largest operating refinery in the US, and the impact is unclear – although HO spreads are racing higher on unconfirmed reports that the damage was done to a diesel hydrotreater. Meanwhile, the Euro is soaring on news that the ECB may provide insurance for investors in Spanish debt, which is lifting equity markets on both sides of the Atlantic.

With the bounce back in product prices, it seems that we’re poised for another bout of range-bound trading, as technical support held yet again. The mid $2.90s now provide resistance to the upside for RBOB, and $3.15-$3.25 holds a cluster of hurdles for HO.

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Energy Prices Selling Off

On October 3, 2012 by TradingDesk
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Energy prices are selling off again this morning, with the manic RBOB contract once again leading the way, trading more than 8 cents lower just minutes ago. Weak economic data points from China and Europe are taking the blame, although stocks have not yet reacted in kind, so it may be more of a factor that the “hot money” that had driven commodities for the past few months is finally heading for the exits.

WTI, HO and RBOB are all trading at or near their critical support levels, and a break here sets up another 20+ cents of losses in the near term. While seasonal trends support the case for more selling, if we fail to follow through with below these levels, another rally can’t be ruled out.

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