Energy Futures Failed to Follow Through on Major Sell-Off

On April 3, 2014 by TradingDesk

Energy futures failed to follow through on their threat of a major sell-off Wednesday, despite more signals from Libyan officials that a solution to reopen much of their shuttered infrastructure was in the works. The S&P 500 reached a new record high, which seemed to coordinate with the bounce in energy futures, suggesting that the correlation between asset classes is not completely gone, although it has been dormant for some time.

The situation for prices is now very similar to what we saw 2 weeks ago when both RBOB and ULSD were near the breaking point of a drop into the $2.70s but sellers could not find enough conviction to make the move. The difference this time around is that ULSD and Brent futures have broken below long time trend lines, which creates a higher likelihood that we could see much lower prices in the near future. Support is layered in the charts between $2.80 and $2.85, which will provide a good test for refined products to end the week.

According to the DOE, there is plenty of crude oil in the US, as is shown in the Total US Crude stocks chart below, but the Nymex delivery hub for WTI in Cushing OK has fallen to its lowest level since 2009, as the industry has raced to find alternate storage and delivery methods for the surging domestic output of crude.

The last chart below shows Ethanol futures, which appear to have finally burst their bubble, dropping 32 cents yesterday. Tight supplies, primarily due to a backlog of rail cars, still exists in many markets however, with several regions still trading north of $4/gallon. Producers raised their output to their highest levels ever for this time of year – presumably to take advantage of the record high prices – which should help alleviate the total supply issue this summer, but it may not matter unless the rail situation is fixed.

CLICK HERE for a PDF of today’s charts

Market Update (3)

Doc1

Doc2

Doc3

Doc4

Doc5

Doc6

Doc7

Doc8

Doc9

Doc10

Doc11

Doc12

Doc13

Doc14

Doc15

Doc16

Doc17

Doc18

Doc19

Doc20

Doc21

Doc22

Doc23

Doc24

Comments are closed.