Energy Futures Maintain Pattern of Bend-But-Don’t-Break Trading

On March 13, 2014 by TradingDesk

The US Department of Energy announced a test sale of 5 million barrels of crude oil from the Strategic Petroleum Reserve (SPR) Wednesday – the first such sale in nearly 25 years – in a move aimed at assessing the systems capabilities in the face of a rapidly increasing domestic supplies. Many alternate theories as to the purpose of the sale were quickly spread across the industry, but prices did not react as dramatically as they have in the past when this type of announcement was made.

Meanwhile, domestic stocks outside of the SPR surged last week, primarily in PADD 3 (gulf coast) as refiners prepare for spring maintenance. A corresponding drop in gasoline supplies – despite weak demand and higher output – suggests that refiners are holding back “finished” supplies as they work to meet the more stringent RVP specs as we transition to summer grades.

Despite, or perhaps because of, the flood of major headlines in the domestic supply story yesterday, energy futures maintained their pattern of bend-but-don’t-break trading. RBOB and ULSD remain stuck near technical support in the low $2.90s, shrugging off most of the weakness in WTI for now. Technical studies remain mixed, but slight favor remains with bears, and the chance of a substantial move lower if $2.90 breaks looks more likely each day that the complex fails to bounce off of support.

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