Another Significant Move to the Downside

On February 4, 2014 by TradingDesk

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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