DOE Weekly Report

On July 31, 2013 by TradingDesk
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DOE Weekly Report

A Flood of Economic Headlines Today

On July 31, 2013 by TradingDesk
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A flood of economic headlines is hitting the wire today, and so far markets seem to be holding their breath, waiting for the FOMC announcement this afternoon. US GDP in the 2nd quarter beat the consensus estimate, showing growth of 1.7%, but Q1 growth was revised lower. ADP showed private jobs growth of 200,000, adding to the evidence that the US economy continues its slow growth recovery, and makes it less likely that the FED will make a policy shift until more substantial gains are seen.

Energy prices continue to test $3, with both RBOB and ULSD futures trading down to $2.98 only to bounce above the key pivot point again. Charts have shifted from Bullish to Neutral, with a few indicators now beginning to favor a move lower. Today’s DOE report is expected to show gains for refined products, which should give us another chance to break down, although if prior months are any indication, the sustained move won’t happen until after the FED announcement.

After TS Dorian broke up over the weekend, the Atlantic is quiet and no storms are forecast to form this week.

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Market Update

RBOB & ULSD Futures Continue to Consolidate

On July 30, 2013 by TradingDesk
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RBOB and ULSD futures continue to consolidate around the $3 mark, but have been unable to sustain a move below that level. The longer the two contracts hover around this pivotal value, the more important it will become in determining our price direction heading into the fall, as these periods of sideways trade begin to act like the coiling of a spring. Bears will note that the September contract, which will take over prompt month trading on Thursday, is already trading below $3, and may act as an anchor on prices.

Meanwhile, the main story in commodities over the past two weeks has been the involvement of major commercial banks in the physical storage and shipping of physical products. Yesterday, the FERC accused JP Morgan of 8 different types of electricity market manipulation, and the bank agreed overnight to a $410 million settlement to appease regulators as it seeks a buyer for its commodity trading unit. While this may not have an immediate impact on prices, it could be the most important paradigm shift in a decade if those with access to the FED’s quantitative easing and other liquidity programs can’t invest directly in energy and other markets.

Despite all of the noise being made over this issue, non-commercial traders (a category of speculator including the large banks) continued to pour into energy futures last week, with both WTI and Brent crude reaching record net-long positions. In the past, such lopsided positions have often marked the turning point in price trends, as buyers simply run out of dry powder and values have nowhere to go but down. This has called several to suggest that current crude oil values – and refined products by extension – are a bubble filled with speculative funds that will eventually pop due to the combination of growing output and weak global demand. We’ll just have to wait and see if they’re right.

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Market Update

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Market Update

On July 29, 2013 by TradingDesk
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Market Update

Energy Futures Continuing their Correction Today

On July 26, 2013 by TradingDesk
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Energy futures are continuing their bend-don’t-break correction today, with RBOB prices down a dime and ULSD down more 7 cents for the week, while pivotal support at $3 has held up so far. Early in Thursday’s session it appeared that we were on a verge of a major sell-off, with RBOB values down more than 7 cents for the day and momentum building to the downside. A late-morning buying spree halved those losses and sent ULSD briefly back into positive territory, suggesting that it’s too early to call the end to the summer’s bull run.

While refined product traders watch closely for price reaction in a small range around $3, ethanol continues to steal the show with prices having dropped 20 cents in the past week, and RIN values plummeting from $1.20 to $.95, then rallying back to $1.12 only to drop again and end the day at $1. Outside of a major hurricane event, or the volatile Chicago pipeline market, those types of price swings are extremely rare in energy markets, and will be sure to wreak havoc on nationwide rack prices as refiners struggle to determine what the real break-even value of their product is.

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Market Update

Energy Futures Continuing to Correct Lower

On July 25, 2013 by TradingDesk
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Energy futures are continuing to correct lower, despite a bullish DOE report yesterday which showed product demand and exports rising, while stocks fell across the board. Although a single day’s move is far from a trend, it does prove once again that fundamentals are still not the main driver of price action. Both RBOB and WTI traded down to $3.01 overnight, but have not been able to test the pivotal $3 mark yet. The price action at this level will go a long way to determine whether prices drop back to the spring support layers around $2.70, or push towards the 2013 highs.

Tropical storm Dorian was named in the Eastern Atlantic yesterday, and while it is still very early in its development, several forecasting models suggest it could hit the US East Coast next week. A larger storm may be building in Washington DC however, as the Department of Justice has now opened a probe into metal warehouses, run by the largest banks, and the potential for price manipulation. This adds to a long list of inquiries in the past week which have the potential to change commodity trading as we’ve known it for the past decade if banks are restricted or excluded from trading.

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Market Update

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DOE Weekly Report for July 24, 2013

On July 24, 2013 by TradingDesk
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DOE Weekly Report

DOE Weekly Report

On July 24, 2013 by TradingDesk
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DOE Weekly Report

Modest Sell-Off Across the Globe

On July 24, 2013 by TradingDesk
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A contraction in Chinese manufacturing data has sparked a modest sell-off in commodities and equities across the globe this morning. News that Euro-Zone PMI’s had moved back into positive territory has done little to stop the downward momentum so far, as China remains the engine of global growth, and has fallen far from decades of 12% annual gains. The selling has not reached 1% however, suggesting this is more of a correction than a reversal of the recent uptrend.

For refined products, $3 remains the pivotal mark to the downside. With RBOB down a dime since Friday, look for it to be the leader this week if prices are to end the summer rally. The DOE report today is expected to show gains in refined product inventories, and another draw down in crude, as refiners continue to run near record rates. Charts have pulled back from their bullish stance, making the reaction to a test of $3 all the more important.

The tropical wave that formed off the coast of Africa Monday has been upgraded, and now is given a 40% chance of developing into a storm over the next two days, and could be gaining strength in the Caribbean by early next week. Although this system has a long way to go before becoming a potential threat to production and refining assets, we are entering the 2-3 month period when African storms will be formed every week or two and keep the energy market on its toes.

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Market Update

Energy Market Regulations Take Center Stage

On July 23, 2013 by TradingDesk
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Energy market regulations are taking center stage this week as a Senate committee meets today to review whether it is a good idea to continue to allow commercial banks to control energy and metal infrastructure and physical products. Meanwhile, a high frequency trader was fined $6 million yesterday by US and UK regulators for manipulating energy futures, and the discussion of a record penalty for JP Morgan’s manipulation of electricity markets is ongoing. The critical question in all of this is will the futures markets return to trading on fundamentals, or continue their pattern of trading based on the financial demand for commodities instead of the physical demand for those products.

Meanwhile, RBOB gasoline futures are leading the energy complex lower, and are down nearly a dime for the week. WTI and ULSD meanwhile are slipping more modestly in what appears to be a correction of the overbought condition brought on over the past two weeks. $3 was a pivotal resistance level for ULSD and RBOB on the way up, and it will be a key test to this correction. If $3 holds, it looks like the rally will continue, with a test of the year’s highs likely as we head into the fall. If $3 breaks, there is chart support in 10 cent increments down to $2.70.

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Market Update

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