DOE Weekly Report

On February 5, 2014 by TradingDesk
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DOE Weekly Report

WTI Rally Sparked

On February 5, 2014 by TradingDesk
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News that the US had granted re-export permits to send $5 billion worth of imported crude (presumably from Canada or Mexico) to Europe last year, helped spark a rally in WTI yesterday, as well as stir the debate over the future of domestic crude oil regulations. The fact that it was economical for companies to ship crude into the US, then put it on a boat and send it to Italy economically shows just how significant the spread between grades of crude oil has become, and what a dramatic impact it can have on local refineries. Overnight, the spread between Brent and WTI dropped below $8, just half its value of 3 weeks ago, as Brent crude seems to be falling victim to weak European equity markets.

RBOB and ULSD futures are continuing their volatile 2014 pattern, while ultimately going nowhere. RBOB continues to hold just above $2.60, temping another 10 cent drop, although we are in the seasonal window of time that has historically witnessed the beginning of a spring gasoline rally. ULSD continues to be a story of heating demand and low supplies in PADD 1 which is causing more extreme swings in prompt month spreads. There is some good news for consumers however, as forward value for diesel are now trading 25-30 cents below year-ago values, giving many an opportunity to lock in fuel prices at an advantageous level.

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Market Update (3)

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Another Significant Move to the Downside

On February 4, 2014 by TradingDesk
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RBOB Gasoline and Brent Crude oil futures are on the cusp of another significant move to the downside this morning, and a rolling sell-off across global equity markets – currently rippling through Asia and Europe – is adding to the negative sentiment. $2.60 will be a critical support level for March RBOB, although volatility is likely as the month progresses as traders try to manage a balance between the different RVP specs in the March and April contracts, which are currently trading at a 19 cent spread.

WTI crude is holding small gains at the moment – with news that the US granted more than 100 permits to export limited quantities of domestic crude to Canada and Europe in 2013, and hopes that the Keystone pipeline approval will finally make it through the Washington gauntlet earning credit for the strength. The move has caused Brent’s premium to WTI to fall below $10 for the first time in 4 months, and is eroding refining margins across the US.

ULSD continues to show relative strength as the east coast struggles to catch up on supplies following the string of winter storms, the latest of which briefly shut boat traffic in the New York Harbor yesterday, which helped futures erase an early morning sell-off. The forward curve for distillates continues to favor lower prices, as most forward contracts are now trading below the technical support range around $2.80. The March HO contract is facing a near term pivot point at $3, which should determine our direction for the balance of the week.

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Market Update (3)

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Uncertainty Hanging Over Equities and Energy

On February 3, 2014 by TradingDesk
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A general sense of uncertainty seems to be hanging over financial markets as trading begins for the 2nd month of the year. Global equities are facing further losses, after a tumultuous January, with concerns over emerging market currencies and (a lack of) Chinese economic growth grabbing most of the headlines. Energy markets are stuck debating whether or not the US will finally approve the northern leg of the Keystone XL pipeline, after a report from the US state department used a lot of words to say very little, and left the white house with few reasons not to let the project move forward. That said, it appears that a lengthy “public comment” period will now follow, and any actual progress remains months away.

ULSD futures are starting out 23 cents below where they left off Friday, after a wild day for the expiring February contract saw 15 cents gains at 1pm, only to drop by 14 cents in the last 30 minutes of its existence. The volatility in inter-month spreads has left a mess of the charts, and a neutral outlook near term. Investors did pour money into ULSD (and crude) futures last week, trimming the net short position of the non-commercial trading group. RBOB meanwhile looks like it has more room to fall, even though we are officially entering the window for a spring rally in gasoline prices. Investors reduced their bets on higher prices last week, but need to be watched closely going forward, as the seasonal long gasoline is typically a very popular (and crowded) trade. If the typical spring rally is to take place in 2014, the managed money class of traders is likely to jump on board early and often.

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Market Update

HO non comHO managedRBOB non comRBOB non comWTI non comWTI managedbrent managed

 

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