All 3 Nymex Petroleum Futures Contracts Drop

On December 31, 2013 by TradingDesk
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All 3 of the Nymex petroleum futures contracts dropped by more than 1% Monday, the first significant piece of selling in the past 2 weeks. With little in the way of headlines driving the action, it appeared that this was simply a corrective move after 20 cent gains for refined products, and the first settlement above $100 for WTI since the Syrian conflict reached a fever pitch this summer. Trading has been quiet overnight, with RBOB and WTI showing modest losses, while ULSD holds on to fractional gains. Technical studies continue to favor higher prices near term, and the first question to be answered in the new year is if the speculative funds that arguably have driven much of the recent run up in prices will continue to pour into the long side of commodities when trading reopens Thursday.

Another explosive derailment of a train carrying Bakken crude – that forced the evacuation of a North Dakota town yesterday – sets the stage for another major theme in 2014: How will the industry adapt to the rapid increases to domestic crude production? Expect the arguments for how best to transport this product – primarily new pipelines vs. rail – to heat up, along with the discussion about whether or not to lift restrictions on US exports of crude. The dislocation of oil production and oil refineries has caused major disruptions to refined product markets over the past 2 years, and all signs point to that continuing next year.

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Market Update

Refined Product Futures Taking a Break From Their Rally

On December 30, 2013 by TradingDesk
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Refined product futures are taking a break from their December rally this morning, with both RBOB and ULSD down ½%, following 20 cent rallies for each contract over the past 7 trading sessions. Each contract is in a technical “breakout” signaling higher prices to come, although some skepticism remains as the bulk of the move higher happened on light holiday-induced trading volumes. Both contracts are in “over-bought” territory at the moment, leaving them susceptible to a short term correction, although charts continue to favor higher prices in the new year.

Friday’s DOE report showed that stockpiles for crude and products continued to drop ahead of year end, despite refiners running 900mb/day more crude than they did a year ago, nearly 2 million b/day over the 5 year average. Although domestic demand has shown signs of modest growth over the past couple of months, the story remains the US export market, as the total Import/Export number for refined products neared a net export figure of 2 million b/d for the first time ever. As US crude production swells beyond the current 25-year highs, expect the debate over allowing petroleum to be exported before being refined to heat up in 2014.

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Market Update

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DOE Weekly Report 12.27.13

On December 27, 2013 by TradingDesk
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DOE 12.27

Market Update 12/26/13

On December 26, 2013 by TradingDesk
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Market Update

Energy Futures Took A Break Monday To Rally This Morning

On December 24, 2013 by TradingDesk
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Energy futures took a break from their rally Monday and were quiet overnight, but have risen in the past few minutes after the release of the US Durable Goods report for November. The report showed a total increase of 3.5% for the month – 4.5% when excluding aircraft – which outpaced estimates. With little else in the news today – and fewer yet around to hear it – it may be enough to keep the upward momentum for now.

RBOB just broke above $2.80, and is poised to test the 200 day moving average, which looks to be a pivot point between another major move to the upside, and falling back into the $2.70s. This is typically a weak time of the year for gasoline, since EPA requirements (specifically allowing higher RVP) allow for increased gas production and driving demand slows in the winter. While Gulf Coast and Midwestern markets remain steeply discounted to RBOB, rumors of refinery issues on the East Coast & in Europe have helped the contract rally by nearly 20 cents in the past two weeks. ULSD continues to lag, but charts suggest that if the HO contract can break resistance in the $3.08 range, there’s a good chance we’ll see $3.20 early in 2014.

Markets are closing an hour early today, and will be shut all day tomorrow. Merry Christmas.

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Market Update

Energy Markets Open On A Soft Note

On December 23, 2013 by TradingDesk
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Energy markets are opening on a soft note, after one of the strongest weeks of the year fueled by the FED, and refinery issues across the globe. RBOB gasoline futures were up 15 cents last week, while Gulf Coast grades were up 20, and Group 3 barrels were up 26. Diesel prices lagged, with ULSD futures outpacing most cash markets with 10 cent gains. The move leaves both refined product contracts on the verge of a technical breakout to the upside, that could add another 15-20 cents to current values. The next big test for RBOB, now that its moved above its November highs is the 200 day MA at $2.82. ULSD still must break its November high just below $3.09 to set up a move into the mid $3.20s.

The CFTC reported that speculators reduced their long bets in both RBOB and ULSD last week, while they maintained their positions in WTI. Curiously, the ICE commitments of traders report shows that the managed (speculative) net long position in Brent dropped to its lowest level of the year as of December 17, which means investment funds may have missed out on the move. Of course, like the CFTC’s report, the delay from the collection date to the report date makes it impossible to know what, if any, impact those positions had on trading in the back half of the week.

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Market Update

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RBOB and ULSD Manage Late Day Rally

On December 20, 2013 by TradingDesk
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Refined product futures now stand 10 cents above before the DOE report Wednesday morning, as both RBOB and ULSD managed a late day rally Thursday to approach highs for the month. A handful of small refinery issues have helped the futures prices, while prompt gasoline prices in the Group 3 and Chicago spot markets have increased by more than 20 cents in the same time. Futures are now bumping up against the top end of their trading ranges, and could start 2014 with large gains if resistance breaks down. That said, we’ve been at these same levels 3 times over the past month, and each time we’ve pulled back by at least 10 cents.

US GDP increased by 4.1% in the 3rd quarter, the fastest rise in 2 years. Bulls will suggest that this number means there will be more demand for fuel as the economy grows, while bears will argue this is just another reason for the FED to end its QE programs. The API released a report yesterday that favors the bulls, as total petroleum deliveries increased by nearly 5% compared to a year ago. We’ll have wait and see who wins the argument, but with 2 weeks of abbreviated trade ahead, there may not be much of an audience to hear it.

There has been no progress in the Libyan port drama or with French refinery strikes (which were reported to end earlier this week only to expand by today) which could be enough to keep prices elevated through the end of the year.

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Market Update

Overnight Price Rally Wiped Out

On December 19, 2013 by TradingDesk
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RBOB and ULSD futures increased by a nickel after yesterday’s DOE report that showed a spike in demand estimates, and a drop in refinery runs. The table was set for a major push higher, when the FOMC announced that while it would decelerate its quantitative easing (it will now buy $75 billion worth of assets each month instead of $85 billion per month) it would also hold interest rates at record lows for longer than previously planned. US Equities surged on the “Sugar Coated Taper” news, since it seemed that the FED was sending a clear signal that it was merely tapping the brakes, not turning the car around. Energy prices once again shrugged off the move however, and ended the day with only the DOE-induced gains.

Prices attempted to rally overnight, but that move has been wiped out in the past 20 minutes, leaving energy futures stuck in their trading ranges. If the FED announcement wasn’t enough to push energy values through resistance levels to the upside, there appears little else technically or fundamentally that will be able to do it in the near term.

DOE Charts Below: It’s important to note that while the DOE compiles data from all participants in the industry to gauge supplies, its only mechanism for calculating demand is to estimate the number based on the changes in supply, which causes significant volatility in the weekly figures. For this reason, many analysts rely on a 4-week average of the estimate to smooth out the figures.

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Market Update

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DOE Weekly Report

On December 18, 2013 by TradingDesk
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DOE Weekly Report

Traders Await FOMC Announcement

On December 18, 2013 by TradingDesk
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Overnight trading has been a little like the night before Christmas as traders eagerly await the FOMC announcement this afternoon. Yesterday’s API report showed small draws in product stocks which has helped keep RBOB and ULSD modestly in the green so far.

Technical indicators remain stuck in neutral and refined products remain stuck in their trading ranges as a result.

The DOE report will be released at its normal time today, and then will be released on Friday for the next two weeks. If the FED doesn’t make a move today, it seems like prices are poised to limp into year end.

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Market Update

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