Energy Futures Selling Off Modestly This Morning

On June 26, 2013 by TradingDesk

Energy futures are selling off modestly this morning, after US GDP in the first quarter was revised down to 1.8% growth, after previous readings showed 2.4% growth in the quarter. The cut reinforces other data suggesting that US consumers continue to struggle through a period of weak growth, despite the trillions of dollars injected into the economy over the past 4 years. Meanwhile, global stocks have stabilized over the past two days after pledges from Chinese, European, and US central banks that they were still ready to act to prevent any disruptions to credit markets. So, once again, the debate comes down to which matters more, actual economic activity or anticipated central bank action. With the banking quivers running low, the back half of 2013 may witness an interesting showdown between the two.

The story of the week for energy markets has been pipelines. Enbridge was able to restart one of its 3 shuttered Canadian lines yesterday, and anticipated that flood waters would recede enough to restart the other two later this week. That news sent WTI lower early in Tuesday’s session, only to see a comeback later in the day after the President suggested that the long-awaited Keystone XL Pipeline project (considered to be the most significant long-term answer to the glut of North American inland crude) would only be approved if it was proven that it would not increase carbon emissions. With the WTI/Brent spread holding near its recent lows, it seems that many market participants believe this wording suggests the pipeline is finally ready to be approved.

Technical studies remain mixed, with a slightly bearish bias in Crude and ULSD futures, while RBOB remains on the cusp of a major sell-off if it can finally drop below $2.70, just a few cents away from current values.

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