Charts Continue To Favor Higher Energy Prices

On January 31, 2013 by TradingDesk
Off

RBOB capped off its 10th straight day of gains in style Wednesday with a 6.5 cent increase. While the 36 cent rise over the stretch is impressive, we only have to look back to 2011 – when the average monthly range for RBOB was 34 cents – to realize how the lack of volatility over the past year had lulled many into a false sense of calm. With 4 months to go until we would normally expect a spring peak in gasoline prices, expect RBOB to continue to make the most noise. The entire complex is pulling back modestly this morning, but so far this looks more like just a “Reversal Thursday” pause rather than a change in our bull trend. Charts continue to favor higher prices, although all 3 major US contracts are in overbought territory and susceptible to some selling near term.

US Stock indices did see some modest selling Wednesday, after a disappointing drop in Q4 GDP and the FOMC announced nothing new in its January statement, but the move lacked conviction – especially after 3 straight months of strong rallies have pushed values near all-time highs, suggesting that the rally may have more room to run. The correlation between equity and energy prices is returning after a month-long hiatus, so this should help keep refined product prices supported.

 CLICK HERE for a PDF of this morning’s charts

This Week’s DOE Report

On January 30, 2013 by TradingDesk
Off

DOE Weekly Report

Market Reaction to Negative Economic Data May Indicate Sustainability of Energy and Commodities Rally

On January 30, 2013 by TradingDesk
Off

A major RBOB rally is in full effect after the contract earned its 9th straight trading session with gains Tuesday, and is already breaking the $3 mark this morning, a full 30 cents above where we were just 2 weeks ago.  The stretch is the longest consecutive win streak for the contract since the 2nd quarter of 2009 when it rallied from $1.36 to $2.11.  Coincidentally, the 2nd quarter of 2009 was also the last time the US reported a negative quarterly GDP, until this morning’s report showing that US economic activity slipped by .3% in the 4th quarter, sending a cautionary shot across the stock market’s bow as it too has continued a strong rally and is just a few points below record highs on several major indices.

For those looking for relief from the relentless run up in gasoline prices, it may be found in the stochastic indicator which shows the RBOB contract is in its most “overbought” state since the spring of 2010, which ultimately ended in a 30+ cent drop in prices once the May 6th flash crash sent shock waves through markets.  Meanwhile, HO continues its steady climb higher, casually breaking through resistance at $3.10, and now targeting its fall highs in the $3.25 range, while WTI appears poised to test $100.  Today’s price action, specifically the market’s reaction to some surprisingly negative economic data, will tell us a lot about the sustainability of the 2013 rally.

CLICK HERE for a PDF of this morning’s charts

Potential for Price Spikes Is Strong

On January 29, 2013 by TradingDesk
Off

Yesterday’s headline that Hess was planning to shut its Port Reading NJ refinery sent RBOB prices up nearly 6 cents, marking their 8th consecutive day of gains. The breakout above technical resistance makes a strong case that gasoline prices bottomed out in December and are now in the midst of their spring rally. 2 years ago, RBOB rallied from a December Low in the $2.20 range, to a high in May of $3.48. Last year, the contract bottomed near $2.48 in December, and rallied to a high in April of $3.44. While it may be hard to fathom another 55 cent increase on top of the 35 cent gains we’ve seen the past 6 weeks, history – and the move to lower RVP product – do support the theory. Meanwhile, WTI is also breaking out and setting up a test of $100, while HO continues to lag, unwilling to break the pivotal $3.10 level.

Already in the past hour, an attempt to sell-off in RBOB has been reversed suggesting that the conviction to step in front of a runaway gasoline train is lacking. While the country has plenty of gasoline in inventory, we’re still struggling to figure out how to get the excess from the Gulf Coast to fill the hole along the eastern seaboard. As long as this condition remains, and gasoline futures are still delivered in New York Harbor, the potential for price spikes is strong.

CLICK HERE for a PDF of this morning’s charts

 

 

A Tale of Two Refineries

On January 28, 2013 by TradingDesk
Off

Reports that Hess plans to shut its Port Reading NJ refinery sent RBOB values 5 cents higher in just 5 minutes, ending what had been another quiet overnight trading session.  The plant’s closure is another great example of the dichotomy between refiners in the US – those with access to distressed Canadian and inland US crude are making huge profits, while those without are struggling just to break even.  With today’s move, RBOB is clearly in a technical breakout, and it looks like a test of $3.00 is in the cards.  WTI, after 7 straight weeks of gains, also looks like it is due for a test of $100, while only HO is showing reluctance to rally, with $3.10 remaining the pivotal value this week.

US Equities look poised to continue pushing to new 5 year highs, and potentially all-time highs for both the DJIA and S&P 500 after US Durable goods orders for December also came in nearly 2 times as strong as estimated this morning.  All the elements appear to be in place for the start of a strong rally in energy prices, but some caution is warranted after such a sustained buying spree since early December that at some point, the current overbought condition in equities and commodities will have to be corrected.

CLICK HERE for a PDF of this morning’s charts

Another Day, Another Mixed Bag for Energy Prices

On January 25, 2013 by TradingDesk
Off

Another day, another mixed bag for energy prices. WTI and RBOB are continuing their steady march higher, while HO is attempting another small sell-off in sympathy with European Gasoil. RBOB and WTI are through their chart resistance and if HO can break above $3.10, all the pieces are in place for the spring price rally to begin. If you’re getting bored by the lack of price movement, you’re not alone, the WTI volatility index is at its lowest level since it began in 2007. If the pattern of the past 5 years continues however, expect this period of quiet trading to be the calm before a storm, rather than a new trend.

Yesterday’s DOE report showed that refined product demand in the US remains weak, and only a surprising 6% drop in refinery runs – a sign that the heavy spring maintenance season has begun – was able to keep inventories from continuing to build. Also, the correlations between equities and energy prices is beginning to return, which adds to the bullish price sentiment – despite the weak demand – as stocks continue to break through to new 5 year highs.

CLICK HERE for a PDF of today’s chart

DOE Weekly Report

On January 24, 2013 by TradingDesk
Off

CLICK HERE for a PDF of this week’s DOE Report

A Segmented Global Energy Market

On January 24, 2013 by TradingDesk
Off

WTI dropped $1/barrel in 10 minutes Wednesday, following a report that the Seaway pipeline – which was reversed last year and now carries 400,000 barrels/day of crude from the Nymex hub at Cushing OK to Houston – was forced to cut its rates by more than half due to an issue at a pump station. Refined products pulled back in sympathy, but continued to follow the lead of European contracts and ended the day with gains despite the drop in domestic crude. Overnight, the pipeline reported that the issue should be fixed within a week and we’ve completely reversed course. WTI is up 70 cents, while RBOB and HO are following Brent crude lower. This week’s action is a good example of how segmented the global energy market has become. With some US and Canadian grades of crude oil trading for $1.50/gallon less than several international grades, it’s arguable that location has never been more important than it is today for everyone from crude producers to end users.

Charts still continue to point to higher prices for refined products, but warning signs of an overbought market do exist. RBOB hit its 200 day moving average yesterday, and promptly dropped 3 cents. Likewise, HO continues to be unable to settle above $3.08 despite trading over that level several times throughout the day. This action has the potential to create a coiled spring effect on prices that will propel us higher if resistance breaks, or it could be a sign of the end of the recent rally. There’s no way – that I’ve found at least – to be sure what this means until the action plays out.

CLICK HERE for a PDF of today’s chart

Is the Spring Rally On Its Way?

On January 23, 2013 by TradingDesk
Off

It’s another mixed day for energy futures, as RBOB tries to drag HO and WTI out of the red following a report that PBF had to shut several units at its Delaware city refinery for unplanned repairs. Although HO failed again to hold at $3.08, WTI did finally get some follow through buying Tuesday after the governor of Nebraska approved a new route for the Keystone XL pipeline which should help alleviate the glut of land-locked crude across the US and Canada. The US State Department said it would wait until March to make a final decision on allowing the project to commence. While the project seems like a no-brainer to many in the industry, US railroads have been the largest beneficiary of the lack of pipeline space over the past 2 years, and with a famous white-house advisor overseeing the largest such company, it will be interesting to see how the story plays out this spring.

Technical indicators continue to point to higher prices, but caution that RBOB may have outkicked its coverage during the past week’s 10-cent rally and a pullback is due. With US equity indices continuing to push to new 5 year highs, it does seem that the foundation for a spring rally is in place, despite weak supply & demand fundamentals.

CLICK HERE for a PDF of today’s chart

Refined Products Unable to Sustain a Sell Off

On January 22, 2013 by TradingDesk
Off

Refined products were unable – again – to sustain a sell off Monday, and are rallying 1% this morning, despite a flat WTI contract. The US products are being led by the European Brent crude and Gasoil contracts, which are benefiting from a stronger Euro and a major winter storm which has blanketed much of the continent. Time spreads are also strengthening on a rash of refinery blips along the gulf coast. HO is through its first layer of technical resistance already this morning, but some caution is warranted since the contract has hit the $3.08 level 4 times in the past 2 months, and each time it dropped a dime over the next week. RBOB likewise has blown through the 100 day MA resistance level, and if it can break above the $2.85, there is nothing on the charts left to delay a spring rally targeting the $3.30 area.

CLICK HERE for a PDF of today’s chart

Pages:123»