Energy Market Regulations Take Center Stage

On July 23, 2013 by TradingDesk

Energy market regulations are taking center stage this week as a Senate committee meets today to review whether it is a good idea to continue to allow commercial banks to control energy and metal infrastructure and physical products. Meanwhile, a high frequency trader was fined $6 million yesterday by US and UK regulators for manipulating energy futures, and the discussion of a record penalty for JP Morgan’s manipulation of electricity markets is ongoing. The critical question in all of this is will the futures markets return to trading on fundamentals, or continue their pattern of trading based on the financial demand for commodities instead of the physical demand for those products.

Meanwhile, RBOB gasoline futures are leading the energy complex lower, and are down nearly a dime for the week. WTI and ULSD meanwhile are slipping more modestly in what appears to be a correction of the overbought condition brought on over the past two weeks. $3 was a pivotal resistance level for ULSD and RBOB on the way up, and it will be a key test to this correction. If $3 holds, it looks like the rally will continue, with a test of the year’s highs likely as we head into the fall. If $3 breaks, there is chart support in 10 cent increments down to $2.70.

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