Monday’s Early Rally Falls Apart in Last Hour of Trade

On December 17, 2013 by TradingDesk
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Monday’s early rally fell apart in the last hour of trade, as traders appeared to lose interest in the Libyan drama, and striking refinery workers in France agreed to go back on the job. Refined products are back to essentially unchanged for the week at the moment, nearly 5 cents lower than they were 24 hours ago. It was also curious that US equities had a strong rally on the day, as optimism grew that the FED would continue its bond buying program a little longer, but energy prices ignored the news. Volumes are already tailing off ahead of Christmas and New Year’s, so tomorrow’s FOMC announcement may be our last chance for a major move in prices for the year.

While there is little news – besides the FOMC statement – to sway near-term pricing, the debate over whether or not the US should end a 70’s era law to ban crude exports continues to gain more attention. This discussion is surely to become more mainstream as US production marches toward record highs, and the industry struggles to keep pace with the infrastructure to move that crude to refineries. How this will impact domestic fuel prices will be a major contention point in the discussion, but since RBOB and ULSD futures are already taking the lead of Brent crude, it seems that the impact on futures may be minimal. That said, if US and Canadian crude gets closer to parity with international grades, we will likely see the large cash price discounts for gasoline and diesel in the mid-continent vanish as refiners lose their regional advantage and slow runs.

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Market Update

Energy Prices Rallying After Libya Fails To Open Ports

On December 16, 2013 by TradingDesk
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Libya failed to open 3 of its ports over the weekend and energy prices are rallying this morning as a result. RBOB futures are up 4 cents, after dropping a dime last week, and ULSD is pushing a 6 cent increase, nearly wiping out all of its losses from last week. The question now is if this latest set-back, the 3 ports were expected to allow 600,000 barrels/day of crude to resume being exported, is enough to push the contracts above the resistance levels that stifled a rally two weeks ago. $2.75 and $3.08 are the major hurdles on the charts for RBOB and ULSD respectively.

Money managers reduced their net-long positions in Brent crude futures as of last Tuesday – when commitment of traders data is compiled – but added to long positions in WTI. Both grades remain well above historical ranges for this time of year, so clearly investment houses want to own crude oil, even if they seem unsure about which flavor they prefer.

All eyes now turn to the FED, who begin their two-day December FOMC meeting tomorrow. Energy prices have been buoyed by the excess capital injected into financial markets since 2009, so while the FED’s decision may not have an impact on physical demand for refined products, its influence on the financial demand for energy contracts cannot be ignored. Expectations are for the FED to begin tightening its monetary policy sometime in the next 3-4 months. Any deviation from that plan could have a large impact on prices.

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Market Update

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Brent Crude Led Energy Selloff Thursday

On December 13, 2013 by TradingDesk
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Brent crude futures led a selloff in energy markets Thursday as Libya’s claims that they would open 3 oil export facilities this weekend received some form of confirmation from one of the protesting groups that has kept those facilities shuttered for months. RBOB and ULSD futures both followed suit, and broke chart support along the way, while WTI managed to hold flat on the day. This morning, WTI is down nearly $1/barrel, and refined products are struggling to avoid being dragged into another round of selling as a result. There is not a headline to point to for the delayed drop in WTI, so it appears that the heavyweight trading bout for control is the Brent/WTI spread is continuing.

USLD futures have tested the 200 day MA overnight, and so far have held above it. If that level breaks, charts suggest a dime drop, into the mid $2.80s is coming. RBOB meanwhile has very little in the way of technical support standing between current levels and the lows of the year just below $2.50. Both contracts have moved from “over-bought” territory just over a week ago into “over-sold” today, so a corrective bounce is also a possibility.

Next week is the last full trading week of the year, and the action is expected to be dominated by Libyan headlines and the FED’s December FOMC announcement. Equities have pulled back sharply this week, largely due to discussion over monetary tightening, and though the correlation between the S&P 500 and refined product futures has broken down somewhat this year, any further downside in stocks could be enough to spark the next round of selling.

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Market Update

 

Energy Prices Firmly In Neutral Pattern

On December 12, 2013 by TradingDesk
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Energy markets attempted to sell off Wednesday, moving into the red in sympathy with US equities. Stocks were sent reeling by a congressional budget agreement that created concerns that the FED will be forced to begin tightening its monetary policy since the government is at least pretending to do something about its fiscal policy. Unfortunately for consumers, the move was short lived as both RBOB and ULSD futures bounced off of resistance levels and took back most or all of their losses. The inability to move above resistance last week, or below support this week puts product prices firmly in neutral and suggests that we’ll remain stuck in a sideways pattern to finish the year.

The major themes of 2013 were confirmed yet again in yesterday’s DOE report. US production of crude continues to increase dramatically, and US refiners in the Mid Continent and Gulf Coast are rushing to take advantage of the relatively cheap supply. Exports continue to be the key for balancing the domestic supply/demand equation, and yesterday’s net import/export figure of 1.8 million barrels/day of refined product exports reached an all-time high. With crude production forecast to continue growing rapidly, the question for 2014 becomes whether or not the boats can keep up the pace.

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TAC ENERGY Market Update

TAC ENERGY Market Update

Diesel Output

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DOE Weekly Report

On December 11, 2013 by TradingDesk
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DOE Weekly Report

Energy Prices Slipping

On December 11, 2013 by TradingDesk
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Energy prices are slipping this morning, despite another large draw in crude stocks reported by the API last night and a report from the IEA that global demand was ticking higher after 3 years of declines. News that regulators had finally approved the “Volcker rule” restricting banks’ proprietary trading – after 3 years of debate – may influence trading in the near future, but since the rule is more than 900 pages long, it will take some time to figure out exactly what the consequences may be.

WTI hit a 6 week high after yesterday’s API figures were released, and has nearly halved its discount to Brent over the past two weeks as refiners cut inventories before year-end. Crack spreads have dropped sharply as a result, although there are no signs yet that refiners are thinking of cutting back on runs yet, as cash markets across the country remain steeply discounted to the Nymex.

RBOB and ULSD are now poised to test support levels after failing to break resistance over the past two weeks. Peg $2.65 as the near-term pivot point for RBOB and $3.00 for ULSD. Indicators are beginning to roll over and favor lower prices, but there seems to be a general lack of conviction at the moment.

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Market Update

Today’s Market Activity from TAC Energy

On December 10, 2013 by TradingDesk
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Market Update

RBOB and ULSD Failed To Break Resistance Giving Up Friday Gains

On December 9, 2013 by TradingDesk
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The better-than-predicted jobs report sent both US equity and energy markets up by more than 1% Friday morning, and though stocks stayed strong throughout the day, RBOB and ULSD failed to break resistance, again, and gave up most of their gains. It’s difficult to say if this inability to move through technical levels signals an end to the run-up, or just a resting point. Given that there has not been any substantial selling, and that charts continue to give slight favor to the bulls, another move higher still appears likely before year end.

The spread between Brent and WTI continues to be the major story in energy markets. Last week the spread moved from more than $19/barrel to just $13, as US producers held back imports before year end, and as the southern leg of the Keystone XL pipeline was announced to begin its 700,000 barrel/day line from Cushing OK to Pt. Arthur TX in January. The spread has wreaked havoc on cash markets as some refiners race to capture the excess margin afforded them, while others – anyone tied to a Brent index – struggle to break even. The spread has stalled out at the 38% retracement level of its rally from $2 to $19, which could signal another expansion is coming.

So far there is no indication that the storms blanketing the US have had any impact on refinery or pipeline operations. For now the focus will turn to how much the weather will hurt demand.

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Market UpdatebrentHOHO managed netrbobrbob managed netWTIWTI managed

 

Surprising Jobs Report Boosts Energy and Equities

On December 6, 2013 by TradingDesk
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The November jobs report surpassed most expectations this morning, helping to give energy and equity prices a boost after 2 days of selling. The moves have been tempered however, as any piece of good economic news stirs the debate over when the FED will begin to reduce its $85 billion/month in liquidity injections.

RBOB and ULSD are again testing resistance that has kept a lid on the rally over the past few weeks. $2.76-$2.77 is the critical area that RBOB must break, while ULSD must move above $3.09 to continue its move higher. Charts are still giving mixed signals, with slight favor remaining with the bulls.

While winter weather has shut some domestic crude production in North Dakota, the bigger impact may be a downward influence on demand as roads across the southern US are closing today, and the North East is threatened this weekend.

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Market Update

US Production of Diesel Reaches All Time High

On December 5, 2013 by TradingDesk
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A remarkable 3% increase in US refinery runs reported by the DOE Wednesday caused a rally in RBOB and ULSD futures to stall out. Perhaps most notable is that US production of diesel fuel reached an all-time high north of 5.1 million barrels per day as refiners race to take advantage of discounted domestic crude and strong export demand. Crude stocks “only” fell by 5.6 million barrels for the week, half of the API’s estimate, but remain well above their 5 year range as domestic production remains strong.

The spread between WTI and Brent continues to contract this week, now trading at $14/barrel. As expected, OPEC announced no change to its 30 million barrel/day supply quota, but Iran/Iraq and Libya all stated their intent to increase supply by nearly 1 million bpd each in the near future, which could add further pressure to Brent. Libya’s oil minister said that the government plans to reopen all of its ports in the next week. Brent has not reacted severely to the news, suggesting that the market doubts their ability to do so.

Charts are still giving conflicting readings for price direction, although slight favor remains with the bulls. Both RBOB and ULSD remain near the upper end of their ranges, and threaten a sharp move higher should resistance break down.

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Market Update

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