Refined Products Poised to Move Toward Highest Levels

On July 10, 2013 by TradingDesk
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Another large draw in API-reported crude and gasoline stockpiles has sent those contracts sharply higher this morning, already approaching 2% gains for the day. ULSD meanwhile has been left behind, for the moment, as diesel stocks rose in the past week, and the contract has been unable to break above its 200 day MA. Now that RBOB has broken through its near-term resistance levels, only the $3 mark stands between current values and a test of the 2013 high, roughly 30 cents above where it is today. While that move may seem extreme, keep in mind the contract has already rallied 27 cents in the last 7 sessions.

Much of the move in gasoline prices has been attributed to the train derailment and explosion in Quebec over the weekend, which has cast doubts on the long term ability for east coast refiners, including those in the US, to deliver inland crudes via rail. The Irving oil facility in St. John – a major exporter of RBOB to the New York harbor – is also having issues with an FCC, which is adding pressure to prompt values.

While all of the energy futures remain over-bought near term, and susceptible to a sharp correction, the trend is now clear and refined products appear poised – despite weak fundamentals – to make a move towards the highest levels of the year.

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Market Update

Refined Product Futures Failed to Break Above Technical Resistance

On July 9, 2013 by TradingDesk
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Refined product futures failed, again, to break out above technical resistance Monday, and sold off modestly during the afternoon and overnight trading sessions. WTI has pulled back as well after Egypt announced new elections, raising hopes that the recent violence there will end and with it the threat to the Suez canal shipping lanes. The overbought condition on daily charts, and the failure yesterday to break out suggest that a near-term correction lower is in the cards this week unless a new supply threat shows up.

Money managers added to long positions in crude and RBOB contracts, and reduced their short bets on ULSD last week. The question becomes, with speculators already this long, where will the new buyers come from to push crude prices even higher? One school of thought is that when everyone is leaning on one side of a boat, that’s usually when it tips over. However, with North Sea production maintenance going on, a storm in the Caribbean, and middle east unrest all taking place this week, it seems unlikely that a major move to the downside is coming soon.

Chantal is still expected to hit the east side of Florida sometime Saturday, and does not pose a threat, at this point, to the gulf coast. However, several forecasters have now noted the early season similarities in 2013 to both 2005 and 2008, so a major supply disruption over the next few months may still be in the cards.

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Market Update

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Energy Futures Had Their Strongest Week of the Year

On July 8, 2013 by TradingDesk
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Energy futures had their strongest week of the year, despite the holiday-shortened trading schedule, as tensions in Egypt and Syria threatened to spill over to the rest of the region, and after domestic crude stocks dropped by more than 10 million barrels for the week as US refiners ran at the highest rates in 6 years. As the charts below detail, US crude stocks remain above their 5-year range despite the drop, largely due to surging domestic production, which accounts for a million barrels per day of increased output. A crude-oil train derailment in Quebec over the weekend that killed 3 people has so far failed to generate any additional buying this morning as all contracts are slipping modestly into the red.

The technical landscape has shifted rapidly into a more bullish stance, after 10 weeks of being stuck in neutral, although all 3 Nymex contracts are overbought, suggesting we are due for a short-term round of corrective selling. ULSD futures have so far failed to break above the pivotal $3 mark, and RBOB has solid resistance in the low $2.90s. WTI continues to be the catalyst for now, and with WTI/Brent spreads having collapsed, US products may begin to follow the domestic contract more closely than they have over the past two years.

Tropical Storm Chantal is moving quickly toward The Lesser Antilles at the moment, with several forecasts targeting the east coast of Florida next weekend. While it does not appear that this storm will threaten production and refining assets in the Gulf of Mexico, it is a good reminder that 2013 is still expected to be a busy year for storms, with the August-October busy season fast approaching.

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Market Update

Total US crude stocks

Crude output

Refinery Thruput

 

 

DOE Weekly Report

On July 3, 2013 by TradingDesk
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DOE Weekly Report

WTI Crude Futures Surge

On July 3, 2013 by TradingDesk
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WTI Crude futures surged through the $100 mark, for the first time since September, following a 9.3 million barrel draw in API-reported crude stocks, and as the tension in Egypt threatens to spill over into wide-spread violence. Refined products are rallying in sympathy, and are now poised to test the upper limits of their trading ranges, with the 200 day MA a good test for both, coming in at $2.85 for RBOB and just under the $3 mark for ULSD. If these levels should be broken, charts point to a move into the $3.20 range for both product, which would be similar to the late summer price rallies we’ve witnessed over the past two years.

While energy commodities attempt to push higher, Asian stocks are selling off sharply again, and European markets are also lower after Portugal’s cabinet resignations and Greece struggling to meet the latest terms of its bailout package threaten to throw the Euro-zone back into financial turmoil. For most of 2013, energy prices have broken their 4-year-old correlation to equity markets, but if this latest Euro-drama expands, it is likely to be felt across all asset classes once again.

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Market Update

WTI Crude Is Leading Another Push Higher

On July 2, 2013 by TradingDesk
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WTI Crude is leading another push higher in Energy prices this morning, a day after breaking the $5 mark in its discount to Brent Crude for the first time since December of 2010. Domestic crudes are benefiting from the ongoing pipeline issues in Alberta following last week’s floods, and on news that BP has finally started its new 250,000 barrel/day unit in Whiting IN, returning the plant to over 400,000 barrels/day of total capacity, which is expected to help ease the excess product moving from North Dakota and Canada into the US.

Meanwhile, escalating tensions in Syria and Iran, along with maintenance at a major oil field in the North Sea would typically favor a rise in Brent prices over WTI, as they did during the Arab spring 2 years ago, but so far this has not been the case. As if on cue, Goldman Sachs released a trading notice this morning suggesting that it was closing its recommendation on this trade, which may provide the real answer for these swings.

Meanwhile, RBOB and ULSD futures are pushing modestly higher, back into the middle of their trading ranges, without a clear trend to be found on the charts. With global equities mixed, today could be a choppy session for energy markets while the great crude spread unwind unfolds.

Tuesday, July 02, 2013 7:43:19 AM RTRS – GOLDMAN SAYS CLOSING ITS LONG SEP-13 NYMEX WTI VS. SHORT SEP-13 ICE BRENT CRUDE OIL TRADE RECOMMENDATION

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Market Update

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Markets Are Starting the Second Half of the Year With Gains

On July 1, 2013 by TradingDesk
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Most global equity and commodity markets are starting the second half of the year with gains, after Euro-zone Purchasing Manager’s Index (PMI) readings were the strongest they’d been in more than a year – although most still showed that activity was contracting, albeit at a slower pace. Meanwhile Chinese PMI was at its lowest level in 9 months, although overall growth remains in the neighborhood of 7%. Middle East tensions are also adding to the bullish sentiment for Crude oil.

Non-Commercial “Speculative” traders reduced long positions in WTI and RBOB last week, and added to short bets in HO/ULSD. This type of drop across the board is consistent with selling in other commodity groups, most notably Gold, although Brent crude continues to attract more money betting on higher prices to come.

The technical landscape remains mixed for refined product prices to start the third quarter. A break below $2.70 or above $3 is needed for prices to find clear direction for the remainder of the year.

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Market Update

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