Energy Futures Remain Stuck in Neutral

On June 25, 2013 by TradingDesk

WTI crude rallied Monday, in the face of a stronger dollar and heavy stock market selling as 3 Canadian crude pipelines were shut due to flooding in country’s oil hub region, with one having a small spill. While the Nymex benchmark was moving higher, Brent crude took the lead of stocks, and by the end of the day, the spread between the two contracts was at its lowest since January 2011, as is shown in the chart below. The spread between these contracts was arguably the most important story in physical energy markets over the past two years, as record high Brent premiums encouraged more alternative crude transportation, setting off a shortage of Jones Act qualified vessels, driving major expansions in US mid-continent refining, and even the reversal of several major pipelines across the country. Now that this spread has shrunk we’ll have to see if the industry returns to its more traditional movements of crude and refined products.

RBOB and ULSD futures are moving modestly higher this morning after durable goods orders in the US beat expectations, and stock futures are pointing to a higher open. Yesterday losses in both contract were pared, as they were in stocks, as 2 FED governors made speeches suggesting that last week’s discussion about ending quantitative easing were misinterpreted. The question as we move forward is if the market is reacting to the FED, or if the FED is now reacting to the market. Either way, energy futures remain stuck in their neutral trading pattern for a 10th week, with charts giving slight favor to lower prices ahead.

Monday, June 24, 2013 11:27:47 AM RTRS – FED’S KOCHERLAKOTA SAYS SPEAKING OUT TO CLARIFY WHAT HE VIEWS AS A MIS-PERCEPTION IN MARKETS THAT THE FED HAS BECOME MORE HAWKISH, BASED ON REACTION TO LAST WEEK’S MEETING

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