Despite HO Surge and RBOB Drop, Energy Still Trading Within Range-Bound Patterns

On March 28, 2013 by TradingDesk
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Heating Oil prices pushed through resistance Wednesday after the DOE report showed a large draw in stocks, apparently driven by strong exports off the US Gulf Coast. European diesel was also higher as cold weather across the pond boosted demand for heating oil. RBOB failed to hold its early break above resistance levels, and has dropped sharply this morning as a result. News that the Trainer PA refinery was back online after losing power Monday accelerated the selloff in the past hour. If the swings of the past 30 minutes are any indication, it could be an exciting day of trading, since the market is combining the last trading day of the first quarter with preparations for a long weekend. The most common reaction in energy markets is to move higher before long weekends, as many don’t like to be short in case some supply disruption takes place while they can’t trade. What will be interesting this time around is if the Euro-drama creates the opposite effect, and traders don’t want to be caught long if the financial markets implode.

The bottom line is both RBOB and HO are still both stuck in range-bound patterns, and while today’s action may be choppy, I don’t expect any new trends to be formed.

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DOE report for March 27, 2013

On March 27, 2013 by TradingDesk
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CLICK HERE for this week’s DOE report from TAC Energy.

Watch For Energy Buying Pressure Today And Tomorrow

On March 27, 2013 by TradingDesk
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US stocks surged again Tuesday, cheering strong housing data, and ignoring a plunge in consumer confidence. The rally brought the S&P 500 within a couple points – again – of its all-time closing high. Then overnight – again – the Europeans threw cold water on the rally, this time Italy taking center stage after a bond auction failed to raise the funds desired. The EUR/USD fell sharply, and is now trading at its lowest level since November, driving a selloff in stocks on both sides of the Atlantic. Technicians continue to suggest that the loss of momentum at such lofty levels, and the inability to break to new record highs for the S&P is setting up a multi-year top in stock prices, while many others think this is just another euro speed bump.

Energy prices are showing mixed reactions to the drama, with RBOB largely ignoring the move, instead focusing on Delta Airline’s refinery problems following a power outage Monday to rally a nickel yesterday, and another 2 cents this morning. The move has broken through short term resistance this morning, and if sustained sets up another 10 cent rally into the 3.20s. HO remains attached at the hip to Brent crude, and has been unable to bounce off its lowest values since August. Monday will prove critical for the contract, as the May (ULSD spec) contract is currently trying to break the 200 day MA. If the new contract can open above that level, we may have seen the lows in HO values at $2.85. If not, there may be another 15-25 cents to fall.

Tomorrow marks the end of trading for the month, with Good Friday being one of only 3 days all year that commodity futures are closed on both the Nymex floor and Globex electronic sessions. Energy values tend to tick higher ahead of long weekends, so look for some buying pressure to emerge today and tomorrow. The API report last night showed inventory draws across the board, and if confirmed by the DOE today, that natural buying pressure may pick up steam.

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Energy Prices Waiting To See Where The Hot Money Lands

On March 26, 2013 by TradingDesk
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Yesterday morning, the world seemed ready to move past the latest European financial dilemma after an 11th hour deal was reached in Cyprus Sunday night. US markets surged higher at the open, with energy futures aided by news of an upset at PBF’s refinery in Delaware City, and the S&P 500 was just 1 point from its all-time closing high (11 points from its highest intra-day trade) a few minutes into the session. The markets reversed course rapidly mid-morning, when the newly appointed Dutch leader of the Euro zone finance ministers reported that the Cyprus bailout package was a “template” for other countries dealing with the financial crisis. While that statement was later retracted, the damage had already been done, as the man already dubbed the “two lips from Amsterdam” had done with a single word what leaders in the Euro-zone had been trying to prevent for years, suggesting that a crisis in one nation could directly impact the others and that bank deposit seizures may be more than a unique event for a tiny island nation.

RBOB and HO both erased 4-5 cent gains, following the plunge in US stocks mid-morning, and continued to move lower once it was reported that the PBF issue was not impacting production. During the wild price swing, both near-term resistance and support levels held up, containing the action in both directions. Descending triangle patterns are forming for both refined product contracts, with a break below $3.05 for RBOB and $2.85 for HO setting up the chance for significant losses. Meanwhile WTI’s discount to Brent crude has shrunk to $12.75/barrel, from $23 a month ago, its lowest level since June. The move is attributed to the rising production of US shale oil – particularly the increased ability to move that oil via rail car to the coasts – although the rapid flight of speculative money out of the Brent contract is surely contributed. What is not yet clear is if the hot money heading for the exits in Brent is related to the latest European banking drama playing out on live TV.

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Energy Prices Content To Consolidate And Wait For Direction

On March 25, 2013 by TradingDesk
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A last minute deal to bail out Cyprus, without sacrificing insured deposits in its troubled banks, send global stock markets surging higher overnight. The EUR/USD led the charge, breaking back above 1.30 as it appeared that the Euro-zone had dodged another financial bullet. Over the past hour however, the currency has reversed course and is now lower for the day, taking some steam out of the gains in US equities and energy futures.

Now that this drama may be over, the major story this week looks to be whether the S&P 500 can join the DJIA in record-high territory. With the index just 1 solid day away from breaking new ground, opinions vary greatly as to where we go from here. Many have argued that higher prices are inevitable as the US continues its slow journey towards growth, while several technicians are suggesting we are approaching a multi-year top.

Energy prices seem content to consolidate and wait for direction elsewhere. Non-commercial long positions shrunk dramatically again in HO and Brent last week, while WTI did not change much and RBOB buyers returned, and speculative long positions remain near record highs, proving that many funds are content betting that a real spring rally in gasoline prices is still to come. While HO looks the weakest of all the energy contracts on the charts, it should be noted that the last time the Non-Commercial position was this low, it proved its value as a contrarian indicator and the contract rallied more than 40 cents over the next month and a half.

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Energy Prices Step Lower

On March 22, 2013 by TradingDesk
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Energy prices took another step lower Thursday on the heels of a tumbling Brent crude contract and US Stocks. Brent has dropped to its lowest levels of the year this week as production in the north sea has outpaced estimates, Sudan has returned to its role as a crude exporter, and as the latest Eurodrama plays out in Cyprus. US Stocks have seemed to largely shrugged off the news across the pond, but a single line in the FED’s statement from Wednesday has sparked debate that Ben Bernanke has begun compromising with the more hawkish members of the FOMC, which pushed stocks lower.

April HO was the only energy contract to finish in the Green Thursday as liquidity for the soon-to-be defunct delivery specification dries up. With only 5 trading sessions until the ULSD spec takes over, watch the forward months of HO to get the real feel for what diesel prices are doing. Those contracts have fallen below $3, and continue to point to lower prices ahead. RBOB meanwhile has continued its manic behavior, but is near the lower end of its range. Charts for the gasoline contract are stuck in neutral, with a break below $3 or above $3.25 needed for further direction.

This single sentence is causing a great deal of heartburn for holders of US stocks.

http://www.federalreserve.gov/newsevents/press/monetary/20130320a.htm

In determining the size, pace, and composition of its asset purchases, the Committee will continue to take appropriate account of the likely efficacy and costs of such purchases as well as the extent of progress toward its economic objectives.

 

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Markets Trading Quietly

On March 21, 2013 by TradingDesk
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Yesterday’s DOE report showed continuing weakness in the US supply & demand equation, as refinery runs picked up as plants come out of a busy maintenance period. The report wiped out early-morning gains in both RBOB and HO, and for a while it appeared that the week’s sell-off might pick up steam. Prices rebounded in the afternoon however, and the FED’s statement caused a surge in stock indices and energy values, with RBOB outperforming and nearly erasing Tuesday’s 8 cent losses. Markets are trading quietly this morning, appearing to wait and see who will win a tug of war between shrinking European markets (No, they haven’t figured out what to do with Cyprus yet) and US markets which are once again approaching record highs.

Energy futures are back in limbo, RBOB will need to break back above its trend-line at $3.1350 if a true spring rally is to take place. HO needs to get the April contract above $2.90 and the ULSD-Spec May contract back over $3 to prevent further selling. Charts are mixed, with slight favor given to more selling.

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DOE Weekly Report March 20, 2013

On March 20, 2013 by TradingDesk
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A Wave Of Selling On Energy

On March 20, 2013 by TradingDesk
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Refined products finally broke the support that had propped up prices this month, and a wave of selling soon followed. A late afternoon rally in stocks helped limit the damage, but when the dust settled RBOB was down more than 8 cents, and HO more than 6, their lowest levels since January. Stocks are heading higher this morning, on hopes that the FED’s statement due out at 1pm central today will soften the recent hawkish tone which has many worried that the QE party may end early.

The drama in Europe continues to play out, and the EUR/USD is trading at its lowest level of the year, as it becomes increasingly obvious the leaders there are simply making things up as they go. The currency weakness is weighing heavily on Brent crude prices, which also fell to its lows for the year. The tendency for US Products to follow the Brent crude contract helped strengthen prices for much of the past year, but is now having the opposite effect. If Brent breaks below $107, expect both RBOB and HO to follow with more large losses.

April RBOB – The trend line finally broke, pushing prices nearly 10 cents lower.

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Energy and Equitites Reject Selloff Attempt

On March 19, 2013 by TradingDesk
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Energy and stock markets held up remarkably well Monday, rejecting an attempt to sell off heavily in the morning, and gaining ground for most of the afternoon. The debate over the Cypress situation continues to dominate headlines this morning, and has sparked another round of selling in refined products. Both HO and RB are right back where they were yesterday, attempting to break through support at $2.90 and $3.10 respectively. Charts are still mixed, but give slight favor to lower prices in the near term. If these support levels break, both products appear to have around 20 cents to fall before the next layer of support is found. If they hold, expect a 10 cent rise to test their Feb/March resistance levels.

The FOMC begins a two day meeting today, and is expected to leave all current programs in place and unchanged, and QE-Cyprus appears unlikely at this time. Physical markets have been quiet this week with many participants in Houston for the convention formerly known as NPRA, and are expected to go completely silent later this week as all attention turns to the NCAA tournament.

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