DOE Weekly Report

On December 4, 2013 by TradingDesk
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DOE Weekly Report – consolidated for you by TAC Energy

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WTI Crude Surges

On December 4, 2013 by TradingDesk
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WTI Crude has surged by more than $3 in the past 24 hours as news that the southern portion of the Keystone XL pipeline would begin relieving the Cushing OK bottleneck the first week of January sparked a correction in the Brent/WTI spread that had dominated trading over the past few weeks. Then the API poured fuel on the fire when it reported an incredible 12.4 million barrel draw in crude stocks over the past week. The draw was primarily split between PADD 3 (7 million) and PADD 5 (4.5 million) which has caused many to suggest that the move is simply indicative of refiners holding back import cargoes to avoid year-end tax issues, rather than an actual supply issue. Whatever the cause, today’s DOE report will be watched closely for confirmation given the wide-ranging consequences of a major move in the Brent/WTI spread.

The Midwestern meltdown in gasoline has slowed, due to the reversal in crude spreads and a few minor refinery issues, but regional dislocations continue across the country, with 45 cent spreads remaining between gasoline prices in the mid-continent and NY Harbor. RBOB and ULSD remain a few cents from a significant technical breakout to the upside, with charts beginning to move into bullish territory. The $2.75 range will be critical for RBOB, while ULSD needs to break and hold above $3.09. If this happens, charts suggest an additional 15 cents of upside for both products.

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Market Update

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Energy Futures Surge

On December 3, 2013 by TradingDesk
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Energy futures surged Monday, led by Brent crude, which neared a 3 month high after rallying more than $2 at its session highs. RBOB and ULSD were up more than a nickel in sympathy, and a lack of any fundamental news suggested that the sharp move may be due to fresh money being invested on the long side of the market. The theory is consistent with a large increase in managed funds’ net long position in Brent crude, which has increased by 43% in the past two weeks. Whatever the cause, the rally was short lived, and most of the morning gains were wiped out by the end of the day. The retracement has set a new layer of technical resistance that must be broken if a sustained rally is to take place.

The real action Monday came again from Midwest gasoline markets, where both the Chicago and Group 3 spot values continued to plunge. Chicago CBOB values traded fifty cents below the screen, for a cash price of only $2.19, compared to $2.70 in the NY Harbor. Group 3 values are at $2.25 for conventional subgrade, compared to $2.43 in the US Gulf coast. With Padd 2 refinery runs north of 96% of capacity as we enter the weakest demand period of the year, it is expected that the mid-continent dislocation may continue unless there is an issue at local refineries. With some Canadian grades of crude trading at a $30 discount to WTI – a $47 discount to Brent – the advantage in some instances to run crude is between $.75-$1/gallon, so the plants remain profitable despite near-record discounts to the Nymex contract.

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Market Update

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Energy Futures Begin Last Month of the Year on Subdued Note

On December 2, 2013 by TradingDesk
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Energy futures are beginning the last month of the year on a subdued note, as traders work off their food comas and a lack of headlines to provide direction. The spread between WTI and Brent crudes remains the most influential underlying trade in the market, with both RBOB and ULSD futures following the European grade, while regional cash markets are facing record discounts as mid-continent refiners try to capture the extra margin afforded by steeply discounted crude.

OPEC meets this week, and the cartel’s reaction to Iran – sure to try and reassert itself as a leader now that sanctions have been relaxed – will be closely watched. Expectations are for the official quota to remain unchanged, despite an uptick in Iranian exports. Libya continues to struggle to return more than 1 million barrels per day of crude production to the market. Its military this weekend issued thinly-veiled threats to protesters who have shut ports and production facilities.

Technical studies remain stuck in neutral near term, although both RBOB and ULSD are near the upper-end of their recent trading ranges, and could finish the year on a strong note if resistance breaks this week.

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Market Update

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