Energy Futures Pulling Back Modestly

On April 15, 2014 by TradingDesk

Energy futures are pulling back modestly this morning, taking a break from their recent rally that pushed prices to their highest levels in more than a month yesterday. WTI continues to outperform, closing its gap with Brent crude to the lowest level since September. Profit taking is being seen in both outright prices and time spreads for refined products, leaving $3 as the pivot point for the forward curve on both RBOB and ULSD. Technical indicators are turning more bullish, although stochastic indicators remain in overbought territory, which makes a selloff (exactly like we’re seeing so far today) likely. Prices will need to drop back below $2.90 before the April rally can be called over.

In fundamental news, the balance between Ukrainian-related threats to energy supplies is battling (figuratively and literally) with hopes for a solution to Libyan protests that are constantly being floated, although little actual progress has been made on that front. These themes appear poised to remain in the forefront of trading as we head into the summer.

Meanwhile, the battle against high frequency trading crossed over from equities into the commodities arena this week after a group of traders sued the CME Group (the owner of the NYMEX) for allegedly selling market data to HFT firms, allowing them early access to buy and sell orders placed by traditional investors. Although the discussion over the legality and morality of HFT has reached fever pitch, there is not yet any signal that regulatory changes might be coming.

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