Charts Continue to Favor Lower Prices

On November 5, 2013 by TradingDesk
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Energy prices have been mixed, and quiet, so far this week, as the complex takes a breather following last week’s furious selling. There has been little in the way of news to move prices, and volumes have been minimal as a result.

Libya remains the largest potential issue, as the global crude market seems fairly balanced at the moment, and with export capacity 1 million barrels behind schedule, it has the potential to tip the scales into an oversupplied position. Egyptian violence, although not yet a direct threat to supplies, will give sellers a moment’s pause.

Charts continue to favor lower prices over the next few months, with multi-year lows in the cross hairs if the action picks up again soon.

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Energy Futures Sent to Lowest Levels In Months

On November 4, 2013 by TradingDesk
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A surging US Dollar and a break of technical support combined to send most energy futures to their lowest levels in 4 months, and in the case of RBOB gasoline, the lowest level of the year. Concerns over Libyan exports took a back seat on the day, and remain the only significant bullish factor in a global market boasting rising production and weak demand.

Brent crude led the decline, falling by nearly 3% on the day. While that move was impressive, the contract remains above $105, whereas Western Canadian Select (WCS) crude traded for less than $55. At a time when refiners forced to buy international crude grades linked to Brent are facing negative margins – and several contemplating closing down – those refiners with access to the distressed North American barrels are looking at margins north of $1/gallon.

Charts suggest little standing in the way of Brent crude testing the $100 mark, or ULSD testing its lows of the year in the low $2.70s. RBOB is less than a dime from a 3-year low, with most indicators suggesting more selling to come. Speculators continue to trim their long bets in both Crude grades, and in RBOB, while ULSD futures increase their net-short bias. The liquidation could create a snowball effect as lower prices beget more selling to meet margin requirements.

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Look Out Below

On November 1, 2013 by TradingDesk
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Look out below as we begin November trading. All major energy contracts are down this morning, with Brent crude leading the way down after dropping below its 200 day MA. There are not any fundamental headlines driving the move, so it appears to be technical in nature, and may be the beginning of the speculative longs finally heading for the exits.

That said, support has not broken yet for RBOB and ULSD, so this could be more of the same “Bend-don’t-break” action that we’ve seen for the past month, with $2.55 and $2.90 the respective pivot points to watch. We are within a penny of both at the moment, so stay tuned, this could get fun.

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