An Avalanche of Energy Liquidation

On April 4, 2013 by TradingDesk
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Energy futures had their biggest daily sell-off in a year Wednesday as a bearish DOE report, plunging stock market and technical support breakdowns combined to start an avalanche of liquidation. RBOB wasted little time testing support in the high $2.80s overnight, after failing to break resistance at the $3.10 level Monday. The 25 cent drop in 3 days has many suggesting that the top is in for 2013 gasoline prices. HO joined in on the action as well, falling below the 200 day MA, which points to another 10 cents of downside.

Prices attempted to rally overnight, moving up 2 cents, but have dropped a nickel from those levels in the past 20 minutes, as the ECB head Mario Draghi failed to impress the markets during his most recent press conference. For the first time since last summer, the market has a sense of panic about it, with large volumes trying to liquidate in a short period of time. The markets reaction to all of the negative sentiment today will go a long way in providing future direction. If support levels manage to hold, a rally may be salvaged. If not, look out below.

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Slipping Into the Red

On April 3, 2013 by TradingDesk
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Refined products are slipping into the red this morning, ignoring large draws in last night’s API inventory report. After failing to hold above the $3.10 mark for the 8th time in 10 trading sessions Tuesday, RBOB sold off heavily and is currently testing support at the pivotal $3 mark. It has traded below that level a few times over night, so far prices are managing to bounce off that support. If $3 fails to hold, the next layer of support comes in between $2.85 and $2.90. HO meanwhile rallied on the heels of European grades Tuesday, and has dodged the worst of the selling today. There are rumors swirling that the mass liquidation of speculative interest in the diesel contracts over prior weeks, followed by the sell-off in RBOB this week are signs that a large fund has been forced to liquidate positions. These suggestions are completely unsubstantiated however, and until they are, it appears that diesel prices are simply benefiting from the export market, while gasoline values are suffering from weak domestic demand.

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A Mixed Bag In Energy Markets This Morning

On April 2, 2013 by TradingDesk
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We have a mixed bag in energy markets today, with RBOB down 1%, HO up 1%, and WTI just slightly lower. The RBOB selloff appears to be technical in nature, after the contract failed – for the 7th time in 9 sessions – to break above its 14 day Moving Average Monday. Heating Oil meanwhile continues to follow the European contracts, with both Brent and Gasoil moving higher today. Charts favor higher prices in the diesel contract, and more selling for gasoline over the next week.

Yesterday’s show stealer was the corn contract, which completed its largest 2 day sell-off ever after Friday’s crop report showed that US farmers expect to plant a record corn crop this spring. Ethanol values have dropped 22 cents as a result, increasing the incentive for blending with gasoline stocks across the country. The $1/bushel drop in corn will likely allow some of the ethanol plants shuttered last year due to poor margins to start operating again.

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WTI Crude Futures Leading Energy Prices Lower

On April 1, 2013 by TradingDesk
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WTI crude futures are leading energy prices lower as we begin trading for Q2, on speculation that the weekend spill of Canadian crude from an Exxon pipeline in Arkansas will delay legislative efforts to begin the building of the Keystone XL pipeline, leaving more North American crude land-locked and heavily discounted to global water-borne grades. US equities are flat, after the S&P 500 set a record high close Thursday, but has still been unable to break through its all-time high trade. Asian markets are weighing on the action this morning, as business conditions in Japan continue to deteriorate, and China’s manufacturing grew at a slower pace than forecast.

As we begin the 2nd quarter, HO is less than ½ cent from where it began the year, even though it got a 12 cent boost when the more stringent ULSD spec contract became the prompt month. The diesel contract is exactly in the middle of its trading range for the year ($2.85 low – $3.25 high) with little technical direction. The first test will be if the contract tries to fill the gap left behind on the charts from the expiration of the heating oil spec, which would necessitate a 10 cent drop. If this doesn’t happen soon, a case can be made for a retest of the year’s highs. RBOB gasoline is also stuck in a neutral chart pattern, as speculative long positions (which remain near record highs) battle weak domestic demand for control of prices. RBOB will need to break above its march high at $3.26 to make a case for a continued spring rally, or risk selling off to the $2.85 mark if the seasonal trade, and the flood of speculative interest it brings each year, unwinds.

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