Energy Futures Moving Higher

On June 5, 2013 by TradingDesk

Energy futures are moving higher for a third straight day, shrugging off a global sell-off in stocks, after last night’s API report stunned many by showing a 7.8 million barrel drop in domestic inventory. Yesterday, overnight gains were wiped out early in the session and it appeared that prices were ready for another move lower, until news broke that South Korea would be boost tax incentives for crude imports originating outside of the Middle East. The move is expected to boost Brent deliveries to the 5th largest oil importer in the world, and helped the European grade rally more than a dollar for the day, which pulled refined products in the US higher despite a flat WTI contract.

The bounce so far this week has put futures back in the middle of their sideways trading range, and created yet another layer of support in the mid $2.70s that must be broken if a real price drop is to be seen. For now, charts remain fairly neutral, with some limited suggestion of further selling to come.

While energy commodities appear content to tread water, it’s a busy day in global stock trading after Japan’s prime minister failed to impress markets with the latest step in his stimulus plan to stem 15 years of deflation, and Eurozone GDP fell again in Q1 as the recession in the area now approaches 2 years in length. Asian markets dropped 2-4% and European shares are down 1-2%. So far the selling hasn’t picked up in the US, but if this sentiment travels, it could mean the end of the week’s price gains.

Market Update

Market Update

Early Stages of a New Bear Market

On June 4, 2013 by TradingDesk

Energy prices are moving fractionally higher this morning, after increases of 1-2% yesterday blamed largely on north sea crude field maintenance which could limit the delivery schedule of Forties-grade crude, a key component in the Brent crude quartet. Stock markets also recovered nicely following their worst day of the year to end May, with a Reuters headline perhaps putting things in the best perspective, saying that, “Global shares recovered from one-month lows on Tuesday…after weak U.S. data calmed concerns about an early cut in central bank stimulus.” So, in short, bad news is good news for now.

Despite the bounce in prices, chart continue to give slight favor to lower prices, with some indicators now suggesting we are in the early stages of a new bear market. Fundamentally, record oil supplies in the US and weak global demand should keep a cap on buying for now, although since we have entered the official Hurricane season, a storm-induced threat is always on the horizon. Speaking of which, a very large but unorganized system is developing over the Western Caribbean today, and is forecast to bring heavy rains to the southern half of Florida, and along the East Coast over the next week. While it appears unlikely that this storm will do any damage to energy infrastructure, it’s a great reminder that half of the country’s refineries are susceptible to hurricane damage, and with diesel and crude exports from the gulf coast becoming a more important part of the global supply & demand balance, the impacts of a storm could be more wide-spread than ever.

CLICK HERE for a PDF of today’s chart

Market Update June 4


Studies Give Slight Favor to Lower Prices in June

On June 3, 2013 by TradingDesk

Energy prices ended May on a weak note, following US equities sharply lower on Friday. Overnight, the selling started up again on weak economic data from Europe and Asia, with refined products hitting their lowest levels since the first trading day of May, and Brent crude breaking below $100/barrel. The losses were quickly reversed however, following news of an unplanned disruption at a major oil field in the North Sea – which is already scheduled for a heavy maintenance period over the next two months – and just like that products traded 7-8 cents above their overnight lows. Violent protests in Turkey do not appear to have any physical or psychological impact on energy prices yet, but the risk of a contagion event like we saw during the Arab Spring is never far from the minds of many traders.

As we begin June, technical and fundamental studies give slight favor to lower prices across the board in energies, although a clearly bearish trend has not yet formed. Speculative length surged in Brent crude yet again last week, perhaps anticipating shortages due to the maintenance scheduled, while US contracts moved little. With global economies muddling through, discussions of FED “tapering” becoming commonplace, US crude production surging, and OPEC holding its output flat, oilfield maintenance & middle east flare ups may be the only hope for bulls over the next month.

CLICK HERE for a PDF of today’s charts