Another Impressive Rally

On November 15, 2013 by TradingDesk
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RBOB and USLD broke and held above technical resistance yesterday, staging another impressive rally, and setting up for what could be the strongest weekly performance since July. A trio of factors – Libya, the FED, and declining stocks, particularly in PADD 1 – were all cited in the rally.

In just a week, gasoline and diesel prices have moved from the cusp of a major breakdown in prices, to the point of staging a major rally. The next big test will come at $2.72 for RBOB and $3.00 for ULSD. While the move this past week has been impressive, both contracts have moved into oversold territory according to some indicators, and if this latest rally stalls out near these levels, longer term charts continue to suggest lower prices ahead.

Meanwhile crude continues to lag behind, as total domestic stocks and stocks at Cushing OK build, despite high refinery run rates for this time of year.

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Market Update (3)

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DOE Weekly Report

On November 14, 2013 by TradingDesk
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DOE Weekly Report

November Rebound Continues

On November 14, 2013 by TradingDesk
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Energy futures continued their November rebound Wednesday aided by news that Libya was forced to shut down another oil field due to protests, and as the NYMEX hub for RBOB and ULSD continued to struggle with tight supply for prompt barrels. Equity and energy markets were also boosted by prepared testimony of Janet Yellen, the nominee to replace Ben Bernanke as the head of the FED, which suggested that she is prepared to add more stimulus to aid the US economy.

Both refined product contracts are testing resistance, at $2.65 for RBOB and $2.90 for ULSD. If prices break and hold above these levels, charts are suggesting we may have seen the end of our fall sell-off, and further gains are coming. Brent crude meanwhile is facing a key test at its 200 day moving average near $108, which looks to be a critical pivot point.

WTI continues to lag behind the entire complex as US production grows. The dichotomy between Brent, struggling to overcome supply disruptions, and WTI, struggling to find a home for its excess supply, continues to be perhaps the biggest story in energy markets. Overnight, the IEA weighed in suggesting that while North American supply growth may temper prices in the near term, it does not forecast shale oil to have a major influence on global prices long term.

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Energy Futures Playing Tug Of War

On November 13, 2013 by TradingDesk
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Energy futures are playing a volatile game of tug-of-war this week, as a corrective rally stalled out yesterday morning, and turned into losses across the complex in the afternoon. WTI led the way lower, settling just above $93, its lowest closing value since May.

Overnight, Brent crude surged on news that Libyan protesters had shut down an oil refinery, the latest setback in a country desperately struggling to resume oil exports of over 1 million barrels per day. WTI remained flat meanwhile, which caused the spread between Brent and WTI to briefly hit its highest levels since March at $14/barrel before pulling back.

Refined products have been similarly mixed, with RBOB gasoline futures showing relative strength as the East Coast deals with refinery issues and tight prompt supplies, while ULSD values in several cash markets are threatening new lows for the year.

With both fundamental and technical indicators conflicting, it appears that this volatile, if somewhat aimless, trading pattern may continue for some time. ULSD is testing the upper end of its recent trading range between $2.83 and $2.90, while RBOB must break out of a wider range from $2.50 to $2.65 if it is to find further direction.

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Charts Move Into Neutral Territory

On November 12, 2013 by TradingDesk
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Gasoline prices have surged in the past few days and RBOB futures now stand 12 cents above where they were Thursday, as the NY Harbor hub struggles to recover from a rash of refinery issues along the east coast. The main contributor is news that the Bayway NJ refinery, which was scheduled to complete maintenance this week, had delayed its restart until the end of the month. Cash markets are even more dramatic as NY spot barrels trade more than 20 cents above US Gulf Coast barrels. As we saw last winter, expect the South East US and Florida in particular, to become a victim of the rush to replenish NY.

ULSD meanwhile is struggling to break resistance at the $2.90 level, and WTI has become bogged down at $95. Brent crude continues to rally on the back of Libyan violence, although that move may be tempered by OPEC’s report suggesting that the cartel’s supply will outpace demand for its product next year, despite Saudi Arabia cutting back production.

Charts have moved into neutral territory, with indicators pointing higher, lower, and some suggest sideways trading ahead. The next few weeks of trade will be critical in determining if this bounce is the start of a new rally in energy prices, or just a correction.

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Energy Futures Surge

On November 11, 2013 by TradingDesk
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Energy futures surged Friday, with tensions in Libya and a strong US jobs report getting most of the credit for the move. Protests in Libya have shuttered most of the country’s ports, keeping roughly 1 million barrels/day of oil out of the market. The US Jobs report however could actually act as a bearish influence on prices since it helped the US Dollar surge, and raises the likelihood of the FED reducing its monetary stimulus.

Brent is leading another rally today after talks with Iran over its nuclear program failed to produce any solid results. That means that the economic sanctions will stay in place and Iranian crude will be limited in the export market.

WTI is the only contract in the red this morning, after a train carrying crude from North Dakota derailed and caught fire in Alabama over the weekend. The second derailment this year is likely to garner more attention to the boom in crude-by-rail service across the country. If restrictions are put in place, WTI will come under pressure vs. Brent as concerns over the inability to evacuate the surge in North American production grow.

Non-commercial positions in all 4 major contracts fell again last week, presumably as the recent drop in prices forced some speculative funds out of the market.

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Charts Continue to Favor Lower Prices

On November 8, 2013 by TradingDesk
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Brent crude led another sell off in energy futures Thursday, after the ECB cut interest rates to record low levels, and suggested that negative borrowing rates were a tool they were considering. Chinese oil imports for October also dropped to their lowest level in more than a year. With many forecasts for global growth hinging on China’s appetite, this news comes at a bad time.

ULSD futures dropped to their lowest levels since June, and RBOB made fresh lows for the year. ULSD has several layers of support between $2.72 and $2.82, while RBOB is close to testing a 3 year low at $2.44. Although both contracts are down more than a dime so far in November, and charts continue to favor lower prices over the next few months, there has not yet been a feeling of panic selling that might spark the next major move lower.

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Energy Markets Selling Off

On November 8, 2013 by TradingDesk
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Energy markets are selling off again, after the European Central Bank (ECB) cut interest rates to record lows, which has sparked a furious 1.5% sell-off in the Euro, which has pushed the US Dollar index north of 81, which in the commodity markets of the past 5 years means lower prices for things like Gasoline and Crude oil.

Yesterday’s attempt at rallying fell apart near the end of the day, despite huge increases in estimated demand for both gasoline and diesel reported by the DOE. Crude stocks and refinery runs remain well above the 5-year range for this time of year, and even if you believe the notoriously unreliable weekly demand estimate, the US market is still relying on exports of gasoline and diesel to balance its supply & demand equation.

Today’s selling may be tempered by the first estimate for US GDP which came in at +2.8%, the highest in a year, although some may say that good news is bad for prices as it may incent the FED to begin cutting stimulus. We shall see.

Charts continue to favor lower prices as we head towards year end.

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Market Update (3)

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DOE Weekly Report

On November 6, 2013 by TradingDesk
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DOE Weekly Report

Energy Prices Bouncing Today

On November 6, 2013 by TradingDesk
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Energy prices are bouncing today, after stumbling again Tuesday. Libya is once again taking the blame in headlines for the move – although nothing substantial has changed in their chaotic attempt to restore order to their ports – suggesting that the bounce is technical in nature, as several indicators had moved into “over sold” territory. In order to be seen as anything more than a Dead Cat bounce, RBOB will need to break back above $2.60, ULSD $2.90 and $95 for WTI. Longer term charts continue to point to lower prices.

US crude production and refined product exports will be watched closely in today’s DOE report, and many are expecting heated debate in Washington over whether or not to relax laws prohibiting most crude oil exports from the US, dating back to the oil embargoes of the 70s.

The CFTC has resurrected a plan to restrict speculation in commodity markets. The new version appears somewhat self-defeating however, as it actually relaxes loopholes for how banks can get around the position limits. Expect that debate to be a major story in 2014 as well.

Watch PADD 2 refinery runs to see if mid-continent refiners are ramping up rates to take advantage of weak Western Canadian crude prices, that have dropped to $52/barrel this week. Cash market weakness suggests that refiners have been able to off-set the loss of Citgo’s Lemont IL production which will be shuttered for at least a month due to a recent fire.

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