DOE Weekly Report

On November 27, 2013 by TradingDesk
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DOE Weekly Report

Spread Widened to Largest Level Since March

On November 27, 2013 by TradingDesk
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The spread between Brent and WTI crudes has widened to its largest level since March overnight, after the API reported a 6.9 million barrel build in domestic crude stocks – bearish for WTI – and a new bout of fighting between government soldiers and Islamic militants in Benghazi Libya caused port workers to walk out on their jobs – bullish for Brent. The spread between the grades is causing further dislocation in domestic refined product markets – particularly gasoline – as mid-continent refiners continue to run at high rates take advantage of cheaper crude. Conventional gasoline in the Group 3 market is trading around $2.30 this morning, while NYH conventional is nearly $2.70. If the combination of Middle East violence and surging domestic production continues, it appears likely that these dislocations will continue throughout the winter.

ULSD meanwhile is on the cusp of a breakout to the upside, with $3.05 the only resistance holding back futures from another rally. The storm sweeping across the US will likely create a few headlines regarding demand for Heating Oil, and while any impact may be short-lived and overshadowed by reduced driving demand – it could be enough to push prices through resistance in what is expected to be a low volume trading day.

The Nymex will be open Thursday and Friday, since the rest of the world is not quite as interested in the pilgrims as we are, but trading volumes should be minimal and should not influence overall trends. Spot markets will not be reported either day. Happy Thanksgiving.

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Market Update

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Sell-Off Is Short Lived

On November 26, 2013 by TradingDesk
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The “Agreement to try and make an Agreement” sell-off was short lived Monday, as Brent crude reversed course mid-day, and erased $3/barrel overnight gains. ULSD futures made a similar reversal, as traders doubted that the pact will have a lasting impact on supplies, actually trading in the green for a few minutes in the afternoon after losing 7 cents earlier in the session. RBOB meanwhile held onto losses, after Phillips 66 announced that its Bayway NJ refinery was ramping up operations following a month of maintenance.

Expect volumes to drop off significantly today and tomorrow as the combination of Thanksgiving and a major winter storm keep traders away from their desks. Colonial Pipeline announced today that their operations have not been impacted by the storm, so this may be more of a hit to demand than to supply for much of the country. Florida on the other hand continues to struggle with vessel capacity, and the rough seas caused by this storm have already caused additional delays.

Charts are suggesting further upside for ULSD and Brent, while RBOB and WTI are showing some weakness. The first test for diesel futures will be $3.05, with a target of $3.20 if that level breaks. One note of caution is that some indicators are showing that the contract is overbought and due for a short-term correction. RBOB meanwhile is showing signs of having topped out during last week’s surge, and a test of $2.65 is coming, with a return to support at $2.50 likely should this level break.

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Market Update

Energy Futures Tumble Overnight

On November 25, 2013 by TradingDesk
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A deal to limit Iran’s nuclear enrichment for 6 months, in exchange for roughly $7 billion in relief from economic sanctions sent energy futures tumbling overnight. Although the deal does not allow for an increased quota of oil exports, relaxed insurance restrictions on export vessels is expected to allow Iran to meet its current 1 million barrel/day maximum, a net increase of approximately 300,000 bpd.

The news sent both RBOB and ULSD futures 7 cents lower at one point, although those losses have been trimmed to 3-5 cents currently as markets try to assess if this agreement to attempt to make an agreement will actually have a tangible impact on global supply. ULSD values have bounced 2.5 cents after hitting the 200 day MA support layer, setting up the first key test to the downside after last week’s strong performance.

Investors piled back into Brent futures a week ago, and appeared to benefit as the contract rallied from $106 to $111 during the week. The movement of fund money in the next week may send a strong signal as to the market’s true perception of what is being touted as a major breakthrough in diplomacy after years of economic sanctions on the country that for many years was the 2nd largest OPEC producer.

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Market Update

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Market Talk 11/22/13

On November 22, 2013 by TradingDesk
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Market Update

Market Talk 11/21/13

On November 21, 2013 by TradingDesk
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Market Update

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DOE Weekly Report Recap from TAC Energy

On November 20, 2013 by TradingDesk
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DOE Weekly Report

Market Struggling to Find Direction

On November 20, 2013 by TradingDesk
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Tuesday was a busy day for energy futures, with early morning selling reversed course suddenly mid-day after the Total refinery in Antwerp – Europe’s 2nd largest – reported a deadly explosion. By the end of the trading session however, the selling returned to refined products and Brent crude, while WTI held on to fractional gains. The uptick in volatility is consistent with a market struggling to find direction.

Overnight trading has been a mixed back, with Brent and RBOB futures selling off, aided by news that Libya had reopened an oilfield – although more than 1 million barrels/day of export volume remains offline – and as the Saudi Oil Minister said that the market was “well balanced” and they saw no need to cut back production to combat surging production in the US. ULSD futures have held on to slight gains after the API reported a 4.9 million barrel draw in distillate stocks last night, and WTI is flat.

Although the DOE report today will be watched closely for an update on tight PADD1 stocks, US crude production, and refined product exports, the main story of the day is expected to be the release of the minutes from the last FED meeting, as analysts and traders search for the first hint of an end to the monetary easing that has fueled equity and commodity markets for the past 4 years.

Both refined product contracts are stuck in the middle of their trading ranges, and charts are offering little in the way of direction, so expect the volatile trading to continue in the near term.

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Market Update

Energy Futures Moving Modestly Lower

On November 19, 2013 by TradingDesk
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Energy futures are moving modestly lower today, in what has been a quiet start to the week so far. There have been few headlines to move prices so far, so many are pointing to the resumption of talks between Iran and a host of nations over its nuclear programs as the cause for the weaker prices. Meanwhile, gathering far less attention in the media, but potentially significant for oil markets, are reports that Saudi Arabia – alleged to be furious with the new found “cooperation” between the US and Iran – is working on contingency plans with its old foe Israel on how to respond to the Iranian nuclear threat. While this type of saber rattling is fairly common in the region, there is no mistaking that any actual action would cause a very sudden spike in oil prices.

Technical indicators remain conflicting. WTI is on the cusp of a major selloff, while Brent, RBOB and ULSD futures all appear to be stuck in neutral at the moment. ULSD is in a range between $3 and the low $2.80 range, while RBOB must break out of a wider range from $2.50-$2.70 before finding further direction. Without any fundamental news to move energy prices, US equities may have a stronger influence this week. The big story in stocks is that both the S&P 500 and DJIA broke to new record highs yesterday, before selling off quickly when a major fund manager cautioned markets about future direction. If equity markets face a significant correction, it may be enough to drag energy prices to new lows, while a year-end rally may be enough to push prices through resistance.

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Market Update

Tale of Two Oil Markets

On November 18, 2013 by TradingDesk
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The tale of two oil markets continued last week, as Brent crude had its best performance since Libyan and Syrian concerns caused a sharp price spike this summer, while WTI dropped for the 6th consecutive week. RBOB and ULSD futures both took their lead from Brent, and managed to make a substantial move higher, reducing the likelihood of a major sell-off before year end. As long as the US keeps its status as a major exporter of refined products, it seems likely that futures will follow the international crude grade, while local cash markets may reflect a WTI barrel through discounted basis values.

Such is the case right now, with regular gasoline grades ranging from the low $2.30s in the Midwest – Group 3 market, to nearly $2.70 in the NY Harbor. US Gulf Coast CBOB prices are trading in the middle of that range, just under $2.50.

While fundamental and technical factors seem to favor Brent over WTI, speculative money moved in the opposite direction last week. Managed positions in Brent dropped to their lowest net-long position of the year, while WTI speculative positions gained slightly. Unfortunately, the 3-4 day lag in the data release for these positions means that this movement occurred before the two contracts made most of their moves last week.

A new round of negotiations with Iran will be watched closely this week, and that could be the major influence on prices, as charts remain stuck in neutral for now.

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