Energy Futures Treading Water This Morning

On March 18, 2014 by TradingDesk

Energy futures are treading water this morning, after a furious sell-off Monday finally pushed RBOB and ULSD prices below technical support in the low $2.90s. Both refined product contracts now look to take another step lower based on technical indicators, although a constant flow of headlines out of the Ukraine and Libya are keeping the markets on edge, and could spark a rally at any moment. They key over the next few days will be if the old support now becomes resistance that repels any attempt to rally – and cure the “over-sold” position on the charts – just as they did overnight.

US Equities may also staunch some of the selling as they push higher this week, in what appears to be optimism that the FED will announce some form of flexibility in its monetary policy this week, even if it does reduce its quantitative easing again.

A report that China now has a surplus of diesel supplies amidst an increase in Asian refining capacity, is weighing on Asian and European distillate prices this morning, and could keep a lid on the export-reliant US market, which is already 15-20 cents below year-ago values as shown below. It’s notable that while ULSD futures have wiped out most of their Winter-Storm induced backwardation, while WTI has maintained the shape of its forward curve, presumably due to expectations of continued domestic supply growth.

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