Refined Products Trying To Follow Through On Friday’s Euro-Induced Rally

On December 17, 2012 by TradingDesk
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Refined product futures are trying to follow through on Friday’s Euro-induced rally, shrugging off a weak Empire State manufacturing index. Volumes have been extremely light, with fewer than 2,000 contracts trading hands in each product, suggesting that the holidays may be starting early for energy traders. With the budget negotiations still dominating headlines, light volume heading towards year end leaves our markets susceptible to volatile swings if significant positions need to be moved. Technical studies are mixed, but give slight favor to lower prices in the next few weeks.

The most interesting trade in energy markets remains in physical gasoline markets, specifically the US Gulf Coast, which traded at another record discount to RBOB futures Friday of 36 cents. This is despite the NY Harbor trading at a premium to RBOB, as Colonial pipeline simply doesn’t have space to move all the barrels needed to the Northeast. ULSD values have also sold off heavily in the past week, as we enter what is historically our weakest demand period of the year. IF these levels continue, we could see some gulf coast refiners – who have limited access to land-locked crude – cut runs due to weak economics, all while mid-continent refiners continue to celebrate a record setting year for margins.

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Today’s Market Report From TAC Markettalk

On December 14, 2012 by TradingDesk
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Updated Market Reports from TAC Markettalk

On December 13, 2012 by TradingDesk
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This Morning’s Energy Market Charts

On December 12, 2012 by TradingDesk
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Energy Futures Trying To Rally After Overnight Wipeout

On December 11, 2012 by TradingDesk
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Energy futures are trying to rally yet again today on the heels of a surging EUR/USD, which was buoyed by positive consumer sentiment in Germany overnight, and on anticipation that the FED will have a new asset-buying program at the end of its FOMC meeting tomorrow. After having another overnight rally wiped out Monday, most energy commodities were sitting at their lowest levels in a month, and threatening a test of our summer lows. With WTI, RBOB and HO all deep into oversold territory on the charts, a short covering bounce is not unexpected, and over the past decade, the day before an FOMC announcement often shows strong gains for equities, which remain strongly correlated to energy prices.

In fundamental news, OPEC’s latest report joined a chorus of predictions from other economic groups calling for a reduction in oil demand in 2013 as the global economy struggles through various hardships. In the US Gulf Coast, CBOB gasoline dropped to a near record low of $.30 below RBOB futures as refiners struggle to find a home for winter grades ahead of year-end. With both fundamental and technical factors pointing to lower prices, expect more heavy selling to come if the latest overnight rally is not sustained.

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Energy Futures Up

On December 10, 2012 by TradingDesk
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Energy futures are up roughly 1% this morning, following $.16 and $.13 drops in RBOB and HO respectively last week. Brent crude is up more than $1, following a report of strong manufacturing growth in China, proving that its domestic economy continues to grow despite weak exports as the rest of the world struggles through economic hardship. European markets are selling off modestly, after surprise news that Italy’s PM Mario Monti would be resigning, which has tempered the gains in commodities.

The question this week will be if energy futures can recover from last week’s heavy selling, which pushed products into bearish technical territory and set the stage for a test of this summer’s lows. A retest of what was once support, and now may act as resistance in HO at $2.95 will be the first key pivot point for price action. $2.70 in RBOB, $87 in WTI and $110 for Brent will act as similar hurdles that may well determine if we’re seeing a new rally begin, or just a dead cat bounce.

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Energy Prices on the Cusp of a Major Sell-Off

On December 7, 2012 by TradingDesk
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A plunging EUR/USD led commodities lower Thursday, pushing energy prices to their lowest levels in over a month, and testing the critical support levels that have held up on the charts since October. So far, support has held, and futures are managing small gains following the November jobs report, which showed another modest build in payrolls. The bounce continues to be tempered by another drop in the Euro, after the German central bank forecast much weaker economic activity in 2013.

Diesel prices have failed to pick up any bids from another major earthquake near the site of last year’s devastating tsunami in Japan, which caused a long term bid for physical diesel imports to offset the countries shuttered nuclear power production. So far it appears that major damage has been avoided, and this may be a non-event for prices.

With energy prices on the cusp of a major sell-off – expect RBOB and HO to drop another 15-20 cents if support breaks down – today’s trading action could get extremely volatile. That said, so much focus is on the congressional budget talks, that it’s possible many traders will simply stay on the sidelines until the legislators return Monday.

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CLICK HERE to link to the government jobs report website

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Bearish DOE Report Sends Refined Products Tumbling

On December 6, 2012 by TradingDesk
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A bearish DOE report, that showed large product builds – most notably a 7.8 million barrel build in gasoline stocks – and weak demand, sent refined products tumbling Wednesday, but prices failed to break through major chart support, as we remain stuck in our 6 week old trading ranges. Perhaps the most interesting note in the report was the comparison of refinery output – over 15.5 million barrels/day of refined products – compared to demand at only 13.5. With 2 million barrels a day of “extra” refined product available, the US continues to solidify its place as a major exporter, after half a century of needing imports to support our demand.

Elsewhere, the Euro is selling off heaving after the European Central Bank (ECB) president discussed the ongoing economic weakness in the Eurozone and made no change to interest rates, which has wiped out small rallies in the currency and in most major equity indexes. With US Lawmakers taking an extended weekend break from their budget war, and the middle east quiet for now, Euro weakness may be enough to get energy prices to test the lower end of their ranges yet again today.

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Energy prices remain stuck in neutral today

On December 5, 2012 by TradingDesk
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Energy prices remain stuck in neutral today, with a little something for everyone as RBOB trades fractionally lower, HO is up a penny and WTI is unchanged. The consensus opinion seems to be that a major break from our 5-week-old trading range is unlikely before the end of the year, unless a decision is reached on how to handle the Budget Control act of 2011 prior to it taking effect in January.

Today’s DOE report will be watched closely, following a surprise 5.7 million barrel build in gasoline stocks reported yesterday afternoon by the API. If a similar increase is reported by the mandatory government report (the API is a non-mandatory industry tally), we may see a test of the lower end of our trading ranges. Weak cash markets for gasoline grades suggest that inventories may in fact be growing at a rapid pace. Distillates on the other hand remain near 5-year lows for stocks on hand, as the export market continues to handle excess US production. There is much debate as we head into 2013 if the rapid pace of waterborne exports, nearly 1 million barrels/day this year, can continue with the Euro Zone stumbling into a recession.

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Technical Resistance Holds Off Rally in Energy Prices

On December 4, 2012 by TradingDesk
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Stocks and energy futures were unable to hold onto an early rally Monday, as technical resistance held yet again, and most contracts settled lower on the day. The selling picked up overnight, despite an escalation of tensions in Syria and the USD hitting a 6-week low. The failure to sustain a rally despite bullish macro factors, and a mixed technical outlook suggest that refined products may be stuck in their recent trading ranges for some time. HO has been unable to break above $3.08, or below $2.95, despite testing each side of the range at least a half dozen times in the past month. RBOB is facing a similar pattern with $2.75 and $2.55 the critical levels that we’ll need to break before our next major move can begin.

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