Energy Futures Continued Their Collapse

On March 6, 2014 by TradingDesk

Energy futures continued their collapse overnight, after the parliament in Ukraine’s Crimea region voted to peacefully join Russia, further reducing the threat of violence in the region. While a $2 billion payment owed to Russia from Ukraine comes due tomorrow, and will keep traders on edge today, refined products have already dropped 13 cents since Monday, and more sell signals are flashing. Technical support has broken down in all 4 of the major petroleum contracts, and Brent/WTI and ULSD are all now appearing ready to test the year’s lows, just a week after setting their respective highs.

The DOE report showed another week of lackluster demand for refined products in the US, and an influx of diesel imports has begun to heal the shortage of diesel supplies along the East Coast. Gulf Coast refiners cut runs by 7% during the week, as the region begins a period of heavy maintenance ahead of the transition to summer-grade gasoline. Crude stocks in Cushing OK, the hub for the Nymex WTI contract, dropped for a 5th straight week as the southern leg of the Keystone XL pipeline continues to ramp up operations, and alternate delivery means ease the glut of supply that has been a driving force in energy prices over the past few years.

The discussion over US exports of energy products continues to ramp up, with the US Energy Secretary telling industry leaders that they need to make a better case to overturn a 35 year old law prohibiting domestic crude from being shipped overseas. The secretary also challenged the industry to prove the advantages of sending crude overseas instead of refining products domestically before shipping, as is allowed today. The push to send natural gas products overseas is becoming more popular politically in light of the European dependence on Russian exports via Ukraine, which means this issue is likely to stay in the headlines for some time.

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Market Update (3)

Technical outlook: Brent crude futures have broken trend support, and the 200 day MA, threatening a test of the year’s lows at $105/barrel.

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