Crude Oil and Refined Product Prices Dropping

On March 10, 2014 by TradingDesk

Crude oil and refined product prices are dropping this morning, despite an 11% increase in Chinese crude imports reported last month, and apparently in spite of the Libyan navy firing on a ship loading crude from a rebel-held port. Although Friday witnessed some late buying to salvage a weak week of trading, today’s action suggests that the mood for energy markets has turned decidedly bearish since the beginning of March, and prices are once again on the cusp of a major breakdown.

The $2.90-$2.95 range has several technical support points for RBOB and ULSD, which are being tested this morning, and will be the difference between a week of sideways trading, and a sharp selloff. ULSD did manage to break $3 during Friday’s run-up, but stalled out at the 100 day MA and has since dropped back near the lows for the month. RBOB meanwhile is threatening to fill the gap left in its chart by the switch to summer RVP, which would put a major dent in any chances for a true spring rally, after charts were targeting $3.25 just a couple weeks ago.

Despite the weakness on charts, the escalating tensions in Libya cannot be ignored. Just in the past few minutes, the government has announced a new military force intended to end all protests at seized oil ports. If this action turns violent, we could see increased volatility in prices this week. If, however, the government succeeds in reopening these ports, we could be looking at sub $100 crude in the near future as nearly 1 million barrels/day of production comes back on line.

Non-Commercial “Speculative” long positions in WTI crude rose to yet-another record high as of last Tuesday, according to the CFTC’s latest Commitments of Traders report. Investors also added to long positions in Brent and RBOB, but cut back their bets on higher ULSD prices during the week.

CLICK HERE for a PDF of today’s charts

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