WTI Capps Best Two Week Rally Since Last July

On April 30, 2013 by TradingDesk
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WTI capped its best two week rally since July yesterday, rising nearly $9/barrel in the past 9 trading sessions, despite swelling domestic stockpiles and production. Refined products again chose to take their direction from Brent crude and finished modestly in the red, as they continue to consolidate after April’s big sell-off. Although charts are stuck in neutral, and both RBOB and HO have well-established support in the low $2.70s, some caution is warranted as we head into May, since the month has brought price drops of 30-50 cents in each of the past 3 years. A similar drop this year would put prices right at the lows of last summer, and would go a long way in determining if the early 2013 selloff was the start of a major bear market in energy prices, or simply a seasonal swoon.

The real action yesterday came from the grain pits, as corn surged 6% due to wet weather delaying planting across much of the Midwest. Ethanol values spiked 11 cents as a result, and 2013 RINs climbed back above 70 cents. With ethanol supplies already struggling to recover from limited railcar availability and reduced production, prompt prices in some markets are now nearing $3 for the first time in 2 years.

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Charts Remain Stuck In Neutral For Energy Prices

On April 29, 2013 by TradingDesk
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Energy futures have begun what will be a busy week for economic news with modest selling, both RBOB and HO are down nearly 2 cents, while WTI holds slight gains.  The flight of non-commercial “speculative” money from energy commodities continued last week in HO, RBOB and Brent, while WTI held steady.  As the chart below shows, HO has not had this big of a net short position in the past 5 years.  Charts remain stuck in neutral for energy prices, with a break through resistance in the mid $2.80s for RBOB and low $2.90s in HO needed to continue last week’s bounce.  A break below $2.70 for both will be the key test for lower prices.

Meanwhile, the DJIA and S&P 500 continue to hover near their all-time highs, contrasting sharply with Bond and Commodity markets that are retreating as global economic activity contracts. With only 2 days left to sell by May and go away, the action early this week will go a long way to determine our future trend.

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Rumored International Supply Disruptions Lift Energy Prices

On April 26, 2013 by TradingDesk
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Energy markets surged Thursday on concerns that the alleged use of chemical weapons in Syria would lead to military intervention by world powers, or just the United States. While Syria is not a significant energy producer, its close ties with Iran bring the potential for supply disruption threats to the table. News that Norway may need to shut 7 of its oil fields in June due to pipeline maintenance added to the bullish action on the day.

When the dust settled, diesel prices had risen for the 6th straight day, adding 18 cents to the HO contract during that time. This streak of gains follows a streak of 6 straight losing sessions which had slashed prices by 24 cents. That’s an awful long way to travel in three weeks to end up with a 6 cent price drop and neutral charts that now provide little in the way of direction. RBOB meanwhile looks slightly weaker, and will need to make a run at $2.90 before the end to its bullish action can be called.

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Energy Futures Continue Their Recovery Rally

On April 25, 2013 by TradingDesk
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Energy futures continued their recovery rally Wednesday, boosted by a surprise drop in gasoline stocks in the DOE report, and on false rumors that BP Whiting – the Chicago area behemoth that’s been down for months upgrading its crude units – which sent WTI crude through resistance at $90. The rally has continued overnight, as commodities from metals to grains to energy are all moving higher following a weaker US Dollar. If this bounce is to be considered merely a correction of a larger bear market, resistance at $2.87 for HO, the $2.80 area for RBOB and $92 for WTI should hold and we should end the week on a weaker note. If this rally continues through the end of April however, the bear trend will be broken and we may be facing another extended increase in prices.

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This Week’s DOE report from TAC Energy

On April 24, 2013 by TradingDesk
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Indicators Support Selling In Gasoline, With HO Appearing Less Bearish

On April 24, 2013 by TradingDesk
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Tuesday’s trading session was highlighted by a 3 minute, miniature flash crash, when the Associated Press’s News Twitter feed was hacked, and fake reports of explosions at the White House sent many markets tumbling 1%, only to recover immediately once the truth came out. The speed of the drop, and vanishing liquidity during the move prove again how susceptible these markets are to headline reading algorithms, and that this type of volatility should now be expected. With US equity indexes once again challenging all-time highs, expect the debate over whether or not to “Sell by May, then go away” to heat up over the next week.

This morning’s trade has focused on the worst report on durable goods orders in the US in nearly a year, which has erased most of the modest overnight rallies in both US stock and energy futures. After yesterday’s sell-off, RBOB gasoline remains on the cusp of another major move to the downside, once again testing support at $2.70, which should bring a swift drop into the mid $2.50s if it breaks. Both technical and fundamental indicators support more selling in gasoline prices, and if today’s DOE report is nearly as bearish as is expected, that selloff could just happen today.

HO meanwhile appears much less bearish as it attempts to carve out a bottom in prices along with Brent crude and WTI. Some technical indicators have moved into neutral/bullish territory, with the $2.85 range appearing to be the main pivot point to focus on to determine if diesel prices can recover, or if the sellers are merely taking a break.

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Energy Charts Favor The Bears

On April 23, 2013 by TradingDesk
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The overnight bounce in energy prices was quickly erased once floor trading began on the Nymex Monday, and although HO, Brent and WTI did manage to end the day in the green, the feeble nature of the bounce suggests more selling to come. This morning, more weak data out of China and Europe has sparked another wave of selling across the commodity universe, as the Euro has broken below 1.30 on speculation the ECB will cut interest rates to try and stop the bleeding in the area’s economic activity. With macroeconomic indicators continuing to show weakness, and charts favoring the bears, it looks like RBOB and HO are setting up to test support in the low $2.70s, with an ultimate target in the $2.50 range for both.

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Will A Three Day Energy Rally Continue?

On April 22, 2013 by TradingDesk
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Energy prices are rallying for a third straight day, following their third straight week of losses. Both RBOB and HO contracts are now 10 cents higher than they were Thursday morning, although so far neither contract appears to be doing anything more than correcting an oversold position. The key test this week will be if the products contracts can break above resistance in the mid $2.80s and effectively end the bear market. Brent crude is also rallying this morning, breaking back above $100, and putting sellers on notice that while fundamentals and technical continue to favor lower prices in the future, these markets never move in a straight line for long.

Friday’s commitment of traders report showed what many suspected due to the heavy volume of selling over the past two weeks, that speculators fled from commodity bets, particularly in energy contracts. HO is now in a net short position (speculators are betting on lower prices), which has only happened a handful of time in the past 5 years. These charts continue to bear watching, as all of the other major contracts continue to hold large biases to the upside, and any more fleeing for the exits could trigger the next major sell off in energy prices.

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Refined Products Pushing Fractionally Higher

On April 19, 2013 by TradingDesk
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Refined products are consolidating this morning, pushing fractionally higher after failing to break through pivotal support in the $2.70 range Thursday. The question now becomes if prices can break out of the bear trend that began April 2nd, and has wiped 35 cents off the price of HO, and 45 for RBOB gasoline. The first test to the upside comes in at $2.82 for HO, and $2.84 for RBOB.

US Stocks broke below their bullish trend-line, in place since the furious rally began in November, for the first time yesterday. Technicians suggest that the wild swings in stocks this week may be signaling the end, and perhaps reversal, of that trend. Although the correlations between equities and commodities have broken down again recently, if stocks do capitulate, that will likely add to the negative sentiment already gripping energy prices, along with other commodity markets.

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Flirting With A Significant Bear Market

On April 18, 2013 by TradingDesk
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Refined products fell sharply again Wednesday, following another bearish DOE report that showed domestic demand continuing to stagnate. HO lead the move lower, it’s 6th straight day of losses, and ended at its lowest level of the year, near the $2.70 floor that has played a key support roll several times during the past 3 years. RBOB also flirted with breaking $2.70, and to its lowest levels of the year, but like diesel, was unable to break through. Overnight we’ve moved into a classic “reversal Thursday” roll, with both products bouncing by a nickel, but already those gains have been halved as it seems there simply isn’t any conviction among buyers in the face of weak fundamentals and technical.

The $2.70s may prove the pivotal range for price action for the rest of the year. If we break lower from here, a significant bear market is likely that should push energy prices to multi-year lows. If support holds again, we will likely move into a more traditional pattern of “sell by May” and rallying later in the summer.

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