DOE Weekly Report

On January 8, 2014 by TradingDesk
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DOE Weekly Report

Refinery Issues Push Refined Product Futures Up

On January 8, 2014 by TradingDesk
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A rash of refinery issues – from Chicago to New Jersey – helped push refined product futures up by nearly 1% Tuesday, and Midwestern spot gasoline prices moved up by almost a dime. The cold weather blanketing much of the nation were to blame in most instances, as instruments and chemicals involved in the refining process are simply not made to operate in the extreme temperatures. Refined product terminals across the Midwest and South East also reported a variety issues, from fuel and additives gelling to delivery lines freezing. The good news is that – so far – it doesn’t appear that any of the damage reports suggest long term issues, and warmer weather is on the way.

The forward outlook for pricing remains murky from a technical perspective, and while prices remain near support levels that could trigger another 15-20 cents of downside if broken, we are rapidly approaching the timeframe for a “spring” rally in prices. Each of the past three years has seen moves of more than 30 cents, and with mixed technical and fundamentals, the seasonal influence could certainly take charge.

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Market Update

New January Lows Set

On January 7, 2014 by TradingDesk
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Refined products were up by more than 1% this time yesterday, only to pull back in the afternoon and finish slightly in the red for the day, setting new January lows. Overnight, they’re trying to rally once again. Welcome to 2014 trading, I hope you don’t mind a little whiplash.

Libya continues to top headlines, as their navy opened fire on a ship trying to load at a port held for months by protesters. The cold weather sweeping the nation caused minor upsets at a handful of refineries – most notable are the Exxon and Citgo plants in the Chicago area – but so far it appears that supply assets have not been materially impacted.

Speculative money poured into energy futures as of Dec 31st, according to the latest commitments of traders data, suggesting that it’s been a rough start to the year as prices tumbled and those long positions lost money. There is an argument that funds will often add to positions at year end to improve the look of their year-end financial statements. If that is true, and based on the past week’s action, we may be witnessing an exodus of investment dollars out of energy futures. The question will be if the sell-off forces even more selling as leveraged positions are forced to unwind in order to meet margin calls. With the big 4 petroleum contracts all balancing on the edge of a major move to the downside, the action could become severe if support breaks down.

Commitments of Traders charts below. For more information go to:

http://www.cftc.gov/marketreports/commitmentsoftraders/index.htm

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Market Update

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Prices Bouncing this Morning

On January 6, 2014 by TradingDesk
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US refining throughput that hit its highest levels since 2005 and plunging demand estimates in Friday’s DOE report helped keep the selling pressure on energy futures, which started 2014 with nearly 14 cent losses in the first 2 trading days of the year. A week ago the stage was set for a major technical breakout to the upside in both RBOB and ULSD, but after dropping by 20 cents now both are threatening a major push lower. The volatility of the past few weeks has left technical studies in a mess, and providing little direction. Fundamentally, the major themes of rapidly increasing domestic production of crude oil, near-record refining rates racing against record levels of refined product exports continues to play out – net product exports reached another all-time high above 2 million barrels a day last week – without a clear advantage to drive prices.

Prices are bouncing this morning, as perhaps some traders or algorithms decided that last week’s selling has out-kicked its coverage, and on the latest round of rumors in the Libyan port drama. This time, a Libyan navy vessel is alleged to have stopped a cargo from loading illegally in an eastern port shuttered since the summer by protests. Although the accuracy of reports from the region are approaching comical levels not seen since Baghdad Bob, the 1.2 million barrels/day of crude that’s been kept out of the global market due to protests has the ability to tip the scales for 2014 energy prices.

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Market Update

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DOE Weekly Report

On January 3, 2014 by TradingDesk
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DOE Weekly Report

A Wave Of Selling

On January 3, 2014 by TradingDesk
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A wave of selling took 3% out of most energy futures in the first trading day of 2014. Rumors of Libyan crude production coming back online – still not confirmed today – and liquidation by funds holding near-record length in WTI and Brent took most of the blame, although a surging dollar and dropping equities seemed to contribute to the action. When the dust settled, it was the biggest drop in 4 months, and refined products are left on the cusp of another major move lower after having wiped out the past two weeks’ worth of gains.

The charts below show that ULSD futures have broken below their upward trend-line that’s held the rally since November, while RBOB is still holding above a similar line. Seasonally we would expect that ULSD would outperform gasoline due to cold weather heating demand and reduced driving. If RBOB breaks $2.68 today, it’s likely that it will catch up to the ULSD losses in a hurry. WTI and Brent are both perched in similarly precarious positions. One day of trading certainly does not make a trend, but the sudden shift from a bull market to a bear hints that more selling is on the way.

A safety alert from the Department of Transportation concerning the flammability of Bakken crude oil is grabbing attention, and is sure to keep the debate over energy infrastructure in the main-stream to begin the year. While this may not have a significant impact on outright prices – yet – it does seem possible that it could cause significant volatility in the spread between grades of crude oil, and keep regional product prices dislocated as mid-continent refiners rush to take advantage of the excess margins.

 

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Market Update

ULSD futures – prompt month.

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RBOB Futures – prompt month

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Soft Start to 2014 For Energy Futures

On January 2, 2014 by TradingDesk
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It’s a soft start to 2014 for energy futures, trading down roughly 1% this morning. The latest claim from Libya that they intend to re-open a 350,000 bpd oil field in the next 3 days seems to have sparked the selling, although skepticism remains due to several “false starts” since protests shuttered most of the country’s production a few months ago. The dollar is having a strong day vs. the Yen – reaching another 5 year high – and the Euro, which may also be contributing to the weakness in energy commodities. The correlation between the dollar and energy prices broke down somewhat in 2013, after 4 years of being attached at the hip, and their relationship could be a key factor in price movements for 2014.

RBOB and ULSD prices are now down a dime from the highs set 3 days ago, wiping out more than half of their December rally in just a few sessions. ULSD will have a key test of support around $3, and RBOB will need to break $2.70 if this latest sell-off is to become a trend. Short term technical indicators have moved into neutral / bearish territory, but the trend lines from the rally that began early in November and has added 20+ cents to both products have yet to be tested. We have seen strong first quarter rallies each of the past 3 years, and if support holds near current levels, another push higher seems likely, despite today’s drop.

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Market Update

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