Air Strikes And Fundamentals Tug On Energy Prices

On November 15, 2012 by TradingDesk
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News of Israeli airstrikes against Hamas caused a rapid spike in energy prices Wednesday morning. The chart below shows how quickly prices moved once the headlines broke around 10am eastern. While no production is threatened by the fighting – which is continuing today – Iranian ties to the area will keep the market on edge.

The price gains were tempered by the continued sell-off in stocks, which dropped to their lowest levels since July yesterday, and are continuing to sell-off this morning. The negative economic data continues to roll in today, as weekly jobless claims in the US spiked to their highest level in a year, and the November Philadelphia Fed index substantially into economic contraction. As expected, both reports are blaming Hurricane Sandy for the poor results.

Technical, fundamental, and seasonal factors continue to suggest we’re due for a selloff, but it’s hard to see any major moves to the downside as long as videos of fighting in the Middle East remain on network TV.

 

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Another Overnight Rally Wiped Out This Morning

On November 14, 2012 by TradingDesk
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Energy futures had another overnight rally wiped out this morning, following a drop in the October Retail Sales report for the US. The debate has already started over what impact Sandy may have had on this figures – even though the storm made landfall in the last 2 days of the month – and we fully expect this subject to be brought up with every major economic release through the end of the year.

While this morning’s price reversal is bearish near-term, the jury is still out on future direction after technical support held up across the board during yesterday’s sell-off. HO is developing a bearish descending triangle pattern however, which helps tip the scales in favor of lower prices ahead.

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Energy Futures Continued To Selloff Overnight

On November 13, 2012 by TradingDesk
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Most global stock markets are in the red this morning, after Greece was given a 2 year extension on paying pack its bailout (although the EU and IMF can’t seem to agree who will pay for it) and as Japan appears to be slipping back into recession. The EUR/USD and US Treasury yields are hitting 2 month lows as investors look for a place to ride out the storm.

Energy futures were unable to hold onto their early gains yesterday, and the afternoon selloff continued overnight. Technical studies remain in neutral territory, but bearish fundamental news – Iran’s oil exports are growing despite the embargo, and the IEA is forecasting another drop in global demand – continues to weigh on prices. WTI is about a dollar away from its near-term critical support, and RBOB & HO are both within a nickel, leaving us susceptible to a big drop if the fear trade in financial markets continues.

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Friday’s Rally Capped Off Another Volatile Week of Trade

On November 12, 2012 by TradingDesk
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An increase in reported US consumer sentiment, oversold technical, and continued logistical headaches in the New York harbor sparked a rally in energy futures Friday, capping off another volatile week of trade. Futures are mixed today, with WTI, Brent and HO selling off fractionally, while RBOB continues to gain.

An International Energy Agency (IEA) report suggesting the US would overtake Saudi Arabia as the words largest oil producer in the next 5 years is grabbing headlines this morning. It’s impact on the market may be limited, due to the long-term nature of its prediction, and long-standing controversy of its underlying assumptions on the eventual capacity allowed by hydraulic fracturing.

Tensions in the Middle East are ramping up again, as Israel has been drawn in – albeit on a limited basis – to the Syrian conflict. Meanwhile, the never-ending Greek tragedy continues, which is keeping financial markets on edge, and may limit the buying in commodities. Speaking of which, speculative long positions in US Energies shrank for the 4th consecutive week, although they remain near record-high levels for this time of year. If the hot-money continues to pull out, expect lower prices ahead.

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DOE Weekly Report

On November 7, 2012 by TradingDesk
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A Volatile Trading Week Continued Overnight

On November 7, 2012 by TradingDesk
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A volatile trading week continued overnight. Stock futures gave back all of the week’s gains early in the evening, but rallied back to unchanged once the election results came in. Then early this morning, as negative economic news started flowing in from the European Central Bank and Greece, the selling has picked back up and most major markets are trading around 1% lower. After 2 years of debating the winner of the US elections, I’d expect the markets to continue to debate the effect the results will have for some time.

Energy futures clawed back above the technical support levels that had signaled a bear market last week, only to trade back below them this morning. RBOB has had a 16 cent trading range already this week, 13 for HO, and despite the rally to begin the week, charts still give slight favor to lower prices in the near term.

One critical thing to watch in the months to come is how the highly-politicized Keystone Pipeline, and other similar projects aimed at relieving the glut of physical crude oil from the US Mid-Continent, progresses. The US continues to struggle through the physical logistics of being a crude importer and refined product exporter, and it will be the interaction between industry and government in fixing this problem over the next few years will have significant impact on our markets.

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Despite Refined Products Bounce, Charts and History Suggest Lower Prices Coming

On November 6, 2012 by TradingDesk
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Refined product rallied sharply late Monday afternoon, and are following through on the move this morning. RBOB is now up 12 cents from its lows yesterday, with HO up 8. Much of the move is being credited to the news that Phillips would have to keep its Bayway NJ refinery shut for 2-3 weeks of additional repairs. Brent crude has also been rallying after the world’s largest commodity index fund increased its weighting of the European grade, assuring more investment flows into the contract.

The bounce in products does flatten out the technical outlook somewhat, although charts – and seasonal history – still suggest lower prices are coming.

Infrastructure in the North East continues to slowly come back online after Sandy, but unfortunately a Nor’easter is forecast to hit some of the areas of NY and NJ that took the worst of last week’s storm. While fuel supplies are available in most areas, the new blast of rain and snow will continue to hamper the trucking logistics that are limiting supply in many areas.

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Energy Shows Modest Bounce, But Fundamentals Suggest Otherwise

On November 5, 2012 by TradingDesk
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A surging US Dollar, weak equities and a relaxation of the Jones Act to try and aid fuel supplies to the northeast caused the sharpest selloff in energy futures in 2 months. Operations in the NY/NJ areas continue to slowly come back online, with most NY Harbor terminals now operating at some level, while both the Hess and Phillips refineries remain off line.

Global equities are selling off again this morning, with a dropping Euro leading the way down on fresh concerns over the future of Greece and Spain.

While products are bouncing modestly so far, both technical and fundamental indicators continue to look weak, with another 20 cent drop in products looking possible if support breaks down again.

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