All 3 Nymex Petroleum Futures Contracts Drop

On December 31, 2013 by TradingDesk

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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