Energy Futures Start the Week with Modest Selling

On September 23, 2013 by TradingDesk

Energy futures are starting the week with modest selling, following a volatile week that saw 5+ cent swings in 4 of the 5 trading sessions. Despite the strong bounce Wednesday, following the FED’s “no-taper” decision, ULSD values dropped 11 cents for the week, and RBOB was down 8.5.

Charts are rolling over into bearish territory, with both RBOB and ULSD nearing critical support levels that will likely determine if we drop another 10-15 cents to finish the month. With Libya’s exports now at 40% of their post-war, pre-protest levels of 1.6 million barrels/day, Iraqi and North-Sea field returning from maintenance, and high RVP gasoline season upon us, fundamentals are offering little support to prices at the moment.

Friday’s commitment of traders report shows that large speculators cut their long positions across the board ahead of that announcement, although both WTI and Brent continue to hold a historically large net-long bias. The influence of banks on commodity prices is coming under scrutiny again this week, as a deadline for Goldman Sachs and Morgan Stanley to have their commodity businesses in compliance with FED requirements has come and gone with no announcement as to their future. Why they were ever allowed to be out of compliance is a bit of a mystery. Expect the anti-bank drumbeat to continue to grow louder (note JP Morgan’s most recent settlement for violating trading rules) until some decision is made. Assuming some portion of the record net-long positions in crude is held by these banks, it could be another bearish factor for energy markets if they’re forced to exit.

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