Energy Futures Fall to Lowest Levels in a Month

On September 17, 2013 by TradingDesk
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Energy futures have fallen to their lowest levels in a month overnight, despite a falling US Dollar, as Libya’s government agreed to a deal with protesters to re-open one of its largest oil-fields, although even after this move the country will still be roughly 1 million barrels/day below its peak production for the year. With Syrian fears fading quickly, although susceptible to flaring up at any moment, refined products have moved quickly to test technical support. So far the $2.70 range has held for RBOB, with reports of refinery run cuts due to weak gasoline margins helping limit the damage. ULSD has broken support at $3.05, setting up a test of $3, which was its pivotal level for much of 2013. Indicators for crude and products are turning more bearish daily, and a backwardated forward curve suggests that once the near-term supply disruptions are past, the selling may become severe.

All eyes are turning to the FED today as they begin their 2 day FOMC meeting, largely expected to result in a $10 billion/month cut back in quantitative easing, reducing the total to “only” $75 billion per month. With that action apparently prices into market, it may take a surprise – either no change, or a larger cut – to make much of a move in markets. Although equity futures are modestly lower this morning, charts suggest another push to record highs may be coming soon.

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Market Update

Syria & the Fed Dominate Headlines

On September 16, 2013 by TradingDesk
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Syria and the FED continued to dominate headlines this weekend, and are likely to remain the major drivers of equity and commodity prices this week. An agreement between the US and Russia to call off military action in Syria has sent energy markets sharply into the red overnight. Brent crude is below $110 for the first time since the chemical weapon attack that sparked the threat of US attacks, and speculators reduced their record long exposure in WTI and Brent for a second week.

RBOB and ULSD futures were both down by 6 cents at one point, but have recovered slightly, aided by a weaker US Dollar and surging stock indices celebrating Larry Summers – the front runner to replace Ben Bernanke – removing his name from consideration for the job. The idea is that Summers would have been much more stringent with monetary policy than his competitors, and S&P 500 futures are poised to open at new all-time highs as traders cheer the perception that the era of free money may extend to another FED chairman. This week brings the long-awaited September FOMC meeting, which is widely expected to provide the first details on trimming the quantitative easing packages that have fueled markets for the past 4 years. Our recent pattern has been to rise ahead of the meetings, then sell off briefly following the announcements.

While the 2nd hurricane of the season formed over the weekend, and while Eastern Mexico faces severe flooding, there is no current threat to US energy infrastructure which aids in the bearish case for prices. The $2.70 range remains a pivotal level for RBOB futures, with a break there targeting a slide to $2.50, while $3.05 provides solid support for WTI.

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Market Update

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Energy Complex Rally

On September 13, 2013 by TradingDesk
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The energy complex rallied yesterday due to suspected short coverings and/or the effects of “reversal Thursday”. RBOB settled up over a nickel to $2.7627/gal, ULSD up just under a nickel to $3.1164/gal. The Brent-WTI spread contracted modestly yesterday as WTI added over a dollar to its price to settle at $108.60/bbl. No market moving news regarding the middle east situation was released; all is quiet on the Syrian front, for now.

It will be interesting to see if yesterday’s rally will incite further action on behalf of the bulls. Refined fuels still have a way to go to test significant resistance levels. Interaction with the high 2.80s for RBOB and low 3.20s for ULSD will likely decide the next wave of price direction if the Middle East remains tame.

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Market Update

Slight Draw In WTI Enough To Trigger A Modest Bounce In Futures

On September 12, 2013 by TradingDesk
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The DOE reported a slight draw in WTI stocks which provided enough traction for a modest bounce with WTI futures ending up $0.17/bbl. Refined products posted an inventory build but ULSD followed crude in the bounce while RBOB sold off modestly. Syria headlines remained benign yesterday; the morning’s only “news” of the CIA arming the Al Assad opposition may be enough for prices to follow through on the bounce. News regarding the Libyan oil supply disruption remains relatively scarce, not unlike its impact on the market, as other countries (namely the US and Saudi Arabia) have cranked up their oil production to fill the petrol void.

Tropical depression Gabrielle is now being projected to change course and make landfall somewhere in southeast Canada as Humberto looks to be heading northeast and eventually make landfall somewhere on the US east coast. A new tropical depression that has spawned in the Gulf looks to make landfall in northern Mexico soon; it is unlikely to cause any sort of disruption.

This morning’s NYMEX gains have put some brakes on the sell-off for now. Technical resistance levels are over a dime away from gas and diesel with a new, mild support level put in at today’s open.

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Energy Markets Taking a Break

On September 11, 2013 by TradingDesk
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Energy markets are taking a break from the heavy selling that started the week, with RBOB futures down 11 cents, and ULSD down 9 cents as Syrian tensions have cooled, albeit temporarily. There have been many times in the past 30 years where Middle East supply fears have sparked rallies in oil prices. The attachment shows two of the more notable situations, the first Iraq war and the Arab Spring of 2011, and compares them to current market action. What’s notable is that while in both prior situations prices returned to pre-crisis levels, the catalysts for the move were very different.

While it is much too early to say that the top of the market has been put in, and if Iran retaliates we could see a much larger price spike, technical indicators are beginning to favor lower values, and if history repeats itself, we could be heading back below $100 for WTI before long. Both RBOB and ULSD are showing more bearish indicators, despite today’s modest bounce, with a test of the high $2.60s for gasoline and $2.99 for diesel the critical support levels that could end the rally for 2013.

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Market Update 9.11

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Gas & Diesel Move Considerably Lower

On September 11, 2013 by TradingDesk
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The energy complex sold off sharply yesterday as Putin pulled a quick one on US Hawks by suggesting the international community simply ask the Syrian regime to give up their rumored chemical weapons. Regardless of the proposal’s intent/validity/feasibility, RBOB and ULSD both broke and settled below significant support levels opening up more room for downward movement. Brent crude continued its early morning selling through the afternoon and WTI followed suit losing $1/bbl by the close and another fifty cents in afternoon trading. Regardless of Syria’s impact, or rather lack thereof, on petroleum supply in the Middle East, traders seem to be more willing to stake positions based on its progress while all but ignoring the vacuum of an estimated 1 million bbls/day of supply that Libyan protests have created. A rapid reorganization of holdings might be seen when Syria fizzles and Libya comes into broader view.

Initial projections for tropical storm Humberto has it swinging north with the only possibility of US impact being northeastern contact. Unfortunately for gulf coast refiners, this potential hurricane event does not look to provide any sort of relief from painfully low gulf coast gas crack spreads. The Group 3 unleaded cash price premium to NYMEX has recently pulled back after spiking heavily due to spec changes, Chicago RBOB has done the same. Further volatility with bias to the downside is expected until prices figure out where they stand against these new product types.

After gas and diesel tore through their respective support levels with conviction yesterday, they have moved considerably lower overnight. RBOB now about a dime away from its next support level, ULSD about 6 cents.

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Market Update

Supply Points

www.eia.gov/special/disruptions/

Source: U.S. Energy Information Administration (Sep 2013)

 

Energy Complex Pulls Back

On September 9, 2013 by TradingDesk
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The energy complex has pulled back over the weekend after a Friday rally that made up some of the losses of the past week. The Brent-WTI spread has tightened to about $4/bbl as the European grade sees some selling as the Syria situation slows down. However, next on the Middle East radar is the Libyan protests that have shut down over 80% of the country’s refineries and fuel ports. Although, US markets seem to be paying little attention to this as of now, if the supply disruption continues and a more interesting conflict doesn’t arise, this could be a market mover in the near future. WTI speculative positions have pulled back recently but are still considerably above its 5 year range.

Tropical storm Gabrielle had now cleared the Lesser Antilles and dissipated into a tropical depression about 500 miles to the southwest of Bermuda. As if on cue, Tropical Storm Humberto formed over the weekend just west of Africa and is headed our way at about 40 mph. Physical prices will be watching it as it crosses the pond, as of now, however, prices are still figuring out spec and RVP changes.

HO and RBOB are now only points away from key support levels; price interaction with said level could decide further direction. If support is broken and tensions continue to be relieved overseas, lower prices are expected.

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Market Update

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Inventories, Storms, Politics and Employment Tug On Energy Prices

On September 6, 2013 by TradingDesk
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The DOE reported a smaller than expected draw in WTI stockpiles (decrease of 1.84 million barrels) resulting is a moderate price increase of $1.14; the light, sweet blend which ended the day at $108.37/bbl. Gasoline saw a similar stock reduction yet continued its downward trading which it established early in the day; RBOB settled -.0283 at $2.8360/gal. ULSD saw a marginal build in inventory as output continued to increase for the 3rd straight week but followed WTI prices higher to $3.1397/gal at day’s end. Energy statistics proved to be the most prominent of market influences yesterday as Obama shook hands with Putin at the G20 and support for a Syrian strike continued to wane.

What has now been dubbed as “Tropical Depression Gabrielle” has nearly stalled out over the Dominican Republic moving northeast at only 9 mph. Traders now turn their eye to a new storm developing in the Gulf which the NHC has given a 50% chance to develop into a tropical cyclone in the next 48 hours. A hurricane event may be what is necessary to resuscitate a drowning Gulf Coast CBOB which has dropped 25 cents this week resulting in painfully low crack spreads for refiners.

The BLS reports an increase of total non-farm payroll employment and a decrease in unemployment which has poised equities to open higher and has brought energy prices with it; gas and diesel are up about a penny and a half before the floor open. If we continued upward, RBOB’s got almost a nickel to climb before hitting significant resistance, ULSD still has about 7 cents to go.

 

CLICK HERE for the government employment news release

THE EMPLOYMENT SITUATION — AUGUST 2013

Total nonfarm payroll employment increased by 169,000 in August, and the unemployment rate was little changed at 7.3 percent, the U.S. Bureau of Labor Statistics reported today. Employment rose in retail trade and health care but declined in information.

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Market Update

HOUSEHOLD DATA

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DOE Weekly Report

On September 5, 2013 by TradingDesk
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DOE Weekly Report

Little To Support Wednesday’s Crude Sell-Off

On September 5, 2013 by TradingDesk
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It seems that there is little to support the crude sell-off Wednesday aside from the lack of relevant news and assumed profit-taking. Oil prices shrugged at the US Senate Foreign Relations Panel’s authorization of a military strike on Syria by a 10-7 vote. WTI settled -$1.31/bbl for the day at $107.23/bbl and took ULSD futures with it which finished down about a penny; apathetic RBOB settled 3 points off its open. The Brent-WTI spread widened slightly as Brent settled down less than a dollar to $114.85/bbl.

Group 3 physical gas prices continued to put distance between it and NYMEX gas by .0475 yesterday placing it at a firm 18.45 cent premium. Gulf conventional gas basis tacked on .0475 ending at 16.50 under RBOB; Chicago gases lost .0450. The most promising weather formation located just southeast of Puerto Rico was upgraded yesterday to a tropical depression. As of now, its projected path swings it short of hitting the States and has it dissipating out in the Atlantic after passing over a few Caribbean islands.

Yesterday, API reported a sizeable draw in oil and refined product stockpiles which, if validated by today’s DOE release, could result in an upswing of energy prices. Due to the holiday Monday, DOE will release its most recent figures at 10 AM CST which could be the only source of oil price direction if Uncle Sam’s hand continues to waver over the launch button.

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Market Update

 

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