Energy Futures Moving Lower But Technical Support Levels Holding So Far

On March 18, 2013 by TradingDesk

A little European island nation with a smaller economy than Shreveport LA has shaken global markets after news broke late Friday that bank depositors may be forced to fund a bailout of the nation’s banks using their own savings. While the immediate financial impact of this event should be fairly minor, the idea of having savings accounts seized to finance government shortfalls is frightening investors around the world.

Energy futures are moving lower along with stock markets, but technical support levels have held so far. RBOB still has a major pivot point around the $3.10 range, and HO at $2.90. The charts below show the “non-commercial” positions in the largest futures markets. The red line shows that speculative money has been flowing out of the markets for the past few weeks. What will be interesting to see is how these funds react to the Cyprus news, as a continued “flight to safety” and away from risky assets such as energy commodities may be enough to finally push prices through support and into a major correction.

CLICK HERE for a PDF of this morning’s charts




Refined Products Off To A Morning Rally

On March 15, 2013 by TradingDesk

Refined products resisted another attempt to sell off Thursday, bouncing off of the same support levels that staunched the selling Wednesday, and are now rallying again on the heels of Brent crude –back above $110/barrel – and the EUR/USD, which is back above 1.30. The uptrend in gasoline prices is intact, setting up a key test of resistance in the mid $3.20s over the coming weeks, which will decide if the spring rally of 2013 ends early, or threatens all-time highs for the contract.

HO and WTI prices remain stuck in consolidation patterns, with no clear direction. HO has hit the $2.90 mark 3 times so far in March and bounced each time. Charts suggest that this pattern is one of continuation, which means HO should leave the pattern in the same direction it entered (moving lower) and that $2.70 is the next target.

Euphoria is reigning in US stocks as the DJIA increased for the 10th straight session yesterday (it’s been over 20 years since it gained for 11 straight trading days) and the S&P 500 is just 2 points away from its highest close ever and 13 points from its highest trade. In a note of caution, the highest trade in the S&P 500 happened on 10/11/2007, the index hit 1576.09, only to drop below the prior sessions lows to end the day – the ultimate example of an outside down reversal – kicking off a disastrous period of trading in which the index fell by 57% over the next 18 months.

CLICK HERE for a PDF of this morning’s charts

Diesel Drops While RBOB Pricing Has An Identity Crisis

On March 14, 2013 by TradingDesk

Yesterday’s DOE report showed a 13% drop in the government’s estimate for US Diesel demand for the week, and while those estimates are notoriously unreliable on a short term basis, it was enough to push diesel prices to their lowest level in 2 weeks. So far, support at the $2.90 level (which kept prices from plummeting in February and December) is holding, but charts remain weak and suggest a 20 cent drop is coming if we can break below that level.

RBOB had another identity crisis, nearly mirroring Tuesday’s manic action, rising 3.5 cents early, dropping 9 cents over the next few hours, only to bounce off of its trend line again and finished the day nearly unchanged. The discussion over the impact of the renewable fuel standard continues to dominate market chatter as more evidence piles up that RIN values 20 times higher than they were a year ago are not only holding out the typical flotilla of European cargoes heading for New York this time of year, but are forcing more exports of US Gasoline from the gulf coast. Expect what is already a sensitive political issue to really heat up once the media figures out that the RFS is effectively paying US refiners to send domestically produced gasoline to Brazil, and reimporting their sugar-cane based ethanol.

Meanwhile, US equities continue their steady march higher, with the DJIA rising for 9 straight sessions, and the S&P 500 just 11 points from a record high, but momentum has completely stalled. Although correlations have broken down between equity and commodity markets, if stocks do finally have a pull back, it may add to the bearish sentiment and tip crude and diesel prices lower.

CLICK HERE for a PDF of this morning’s charts


This Week’s US DOE Weekly Inventory Recap

On March 13, 2013 by TradingDesk

CLICK HERE for a PDF of this mornings DOE Weekly Report

A Quiet Overnight Session For Energy After Yesterday’s Wild Ride

On March 13, 2013 by TradingDesk

It’s been a quiet overnight session for energy markets, after another wild day Tuesday, and despite Asian/European and US equities all pointing lower on the day. A surprising drop in US Crude stocks was helped lift WTI crude modestly, while Brent crude continues to struggle following another reduction in the 2013 forecast for global demand by the IEA.

RBOB continued its manic behavior yesterday, dropping by over a nickel at 10am after the bubble in ethanol RINs appeared to have burst, with 2013 values dropping from $1.05 to $.65 per E6 RIN, but once again technical support held and RBOB values rallied almost 9 cents over the next hour, and RIN Values rebounded by 25 cents. As if to admit that the market is thoroughly confused, after all that excitement the RBOB contract ended up down only $.0020. Despite all the noise, the chart still suggests RBOB has more room to move higher.

Heating oil rallied early in the morning after breaking through the 200 day MA, hit its highest level in 6 trading sessions, only to fall to its lowest level in 7 sessions by the end of the day. The outside down chart pattern suggests more selling to come for HO near term, but so far nothing has materialized. Prompt month values for diesel futures are likely to see a rapid drop in liquidity over the next few weeks as focus will turn to the new ULSD spec HO contract that becomes prompt April 1.

April RBOB, trend line is intact.


CLICK HERE for a PDF of this morning’s charts

Second Leg of 2013 Gasoline Rally Appears Intact

On March 12, 2013 by TradingDesk

RBOB futures surged 6 cents Monday during the overnight trading session, then dropped like a rock once floor trading began in New York, falling as much as 7 cents at one point before settling down a nickel. Amazingly, the 13 cent drop from peak to trough did not break the uptrend in gasoline futures, or even threaten Friday’s lows, so we must still consider the 2nd leg of the 2013 rally intact. As if to reinforce that point, energy markets tried unsuccessfully to sell off overnight, as global equities and the EUR/USD dipped, but have reversed course in the past hour and are now staging another modest rally.

While RBOB has been grabbing headlines, HO has literally been going nowhere over the past week, trading in a 5.5 cent range over the past 5 sessions, which is typically a normal move for a single day’s trade. Resistance has held so far at $2.99 (the 200 day moving average) but if it falls, diesel should break out of its consolidation with a modest move towards $3.05.

Brent crude meanwhile has tried twice to break blow pivotal support at $110/barrel. Given its increased influence on US prices, whether or not it can move below that level may determine which way RBOB and HO end up moving this week.


CLICK HERE for a PDF of this morning’s charts

Gasoline Surges While WTI and Brent Crude Drift Modestly Lower

On March 11, 2013 by TradingDesk

Gasoline prices surged by more than 8 cents Friday, as the drama in ethanol RINs which had remained under the radar finally made it to the mainstream news after values broke $1 per RIN. The immediate concern is that US Refiners now have roughly a 10 cent/gallon incentive to export gasoline, and European product that is typically imported to the US East Coast this time of year will stay home to avoid the obligation created by bringing refined product into the country. The rally continued overnight, with RBOB prices up over 6 cents at one point, but have cooled somewhat in the past few minutes, halving that gain. Charts suggest that RBOB has another 10 cents higher to go before running into its next layer of resistance.

Meanwhile, both WTI and Brent crude, along with HO prices are moving modestly lower, partly due to weakening fundamentals – most notably higher OPEC production and a closing tax loophole that may reduce Korean purchases of Brent – and partly due to a continued reduction in speculative money in the markets. The charts below detail the huge reductions in HO and Brent managed net long positions.

Unlike gasoline, crude and HO technicals look weak, setting up an interesting tug-of-war this week. Expect the debate over the Renewable Fuel Standard, which many have blamed on the latest surge in price, to heat up as it appears that the spring rally in Gasoline prices may have just begun its second phase.


Click on each image to download a PDF

WTI and HO Prices Dip Into The Red, with RBOB Refusing To Sell Off

On March 8, 2013 by TradingDesk

Brent crude has fallen $2 overnight, reaching its lowest level of the year at $109/barrel, after a North Sea pipeline was restarted after being down for several days of repair and on reports that OPEC supplies will increase by nearly 2% over the next few weeks. The drop is dragging WTI and HO prices into the red, but RBOB refuses to sell-off so far, content to remain in its trading range between $3.10 and $3.17. Technical studies are starting to roll back into negative territory, hinting that another move the downside may be ahead after this week’s consolidation.

The January jobs report just released has given a boost to prices in energy and equity markets, the unemployment rate dropped to its lowest level since 2008. With the DJIA at record highs, and the S&P 500 only 1.5% away from its own record, the question becomes will better employment data help stocks continue to soar, or will it mean the end of the run as traders anticipate the FED responding with less stimulus.

Total nonfarm payroll employment increased by 236,000 in February, and the unemployment rate edged down to 7.7 percent, the U.S. Bureau of Labor Statistics reported today. Employment increased in professional and business services, construction, and health care.

CLICK HERE for a PDF of the Household Data Employment Report


CLICK HERE for a PDF of this morning’s charts




Market Takes a Breather After February Sell Off

On March 7, 2013 by TradingDesk

Energy futures failed to sustain a rally Wednesday, despite the weekly DOE report showing a 3% drop in refinery utilization on the week and a surge in exports which continue to offset weak domestic demand. The mid-day reversal puts both HO and RBOB prices into a consolidating range as the market takes a breather after the late February selloff. RBOB must break below its trend-line support at $3.08 or above the resistance at $3.17 that stalled yesterday’s rally in order to find direction. HO has a cluster of resistance between $2.99 and $3.05 that it must break above if it is to start a new rally, while $2.90 sets a critical floor for prices. If $2.90 breaks down for diesel futures (which will change from HO to a ULSD spec at the end of the month) a drop to $2.70 appears likely.

CLICK HERE for a PDF of today’s chart

DOE Weekly Report

On March 6, 2013 by TradingDesk

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