Energy Complex Mimicked Equities Yesterday

On April 8, 2014 by TradingDesk
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The energy complex mimicked equities and the dollar yesterday as they continued to sell with conviction due to worries about European bank stimulus. However, news of renewed tensions in Ukraine this morning reversed those losses, and then some, with gas and diesel hanging on above $2.90/gal and crude above $100/bbl. Brent and WTI are torn between bullish effect of Russian aggression and the downward pressure of Libya returning its crude supplies to the market. For now, it seems, whichever news is louder, Putin or Libyan restarts, may decide price direction in the short term.

NYMEX RBOB settled above a couple important technical levels yesterday around the 2.91 level, which, if broken, could show a price drop of over a nickel. HO, on the other hand, is seeing more ceilings than floors with a cluster of resistance levels around 2.91.

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Libya News Sends Energy Futures Lower

On April 7, 2014 by TradingDesk
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Energy futures are sliding this morning after new reports of a deal in Libya, and in sympathy with a broad sell-off in global equity markets.

Libyan government officials have reportedly reached a deal with protesters to immediately open 2 of 4 ports that have been shut down for 8 months, and to have further talks on the other 2. If this is true (there have been several false starts) exports should begin hitting the global market in the next 2 weeks.

The outlook for prices as we move through April remains muddled, with Brent and ULSD prices still perilously close to a major sell-off, while WTI and RBOB look to be contentedly neutral. With charts providing little direction, look for the Libyan headlines to dictate price action this week.

Non-Commercial long positions (betting on higher prices) rose fractionally in WTI last week, and remain well above their highest levels ever for this time of the year. Some analysts continue to point at this as a reason why the complex could sell off sharply, while the potential for a “Golden Cross” chart pattern (50 day MA crossing over the 200 day MA) may be reason enough for those funds to stay put. The relatively neutral positions in Brent/ULSD and RBOB suggest that the WTI net longs may be more of a bet on shrinking stocks in the Cushing OK hub rather than a bet on the entire energy market moving higher.

CFTC Commitments of Traders historical charts.   (CLICK HERE FOR PDF)

Market UpdateWTI NON CommitWTI Managed

Brent managedHO non commHO Managed NetgRBOB Non ComRBOB Managed Net

 

Gasoline and Diesel Futures Stage a Remarkable Comeback

On April 4, 2014 by TradingDesk
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Gasoline and Diesel futures, have staged a remarkable comeback after dropping a dime to start the week. The 10 cent swing in prices pales in comparison to the drama unfolding in ethanol markets however, as those prices have dropped by $1/gallon in the past 3 days, which will take a dime out of E10 prices across the country.

Doubts about the validity of progress in Libya were blamed for a rally in Brent crude yesterday, which contributed to the rally in US products, although given where the bounce began it seems that much of this week’s recovery has been technical in nature. The question now – again – is whether we are entering another period of sideways trading, or just taking a break on our way to lower prices this summer. Charts continue to give favor to lower values going forward.

The March jobs report appears to be a non-event for market activity so far today as the US continues its pattern of painfully slow growth.

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THE EMPLOYMENT SITUATION — MARCH 2014

http://www.bls.gov/news.release/empsit.nr0.htm

Total nonfarm payroll employment rose by 192,000 in March, and the unemployment rate was unchanged at 6.7 percent, the U.S. Bureau of Labor Statistics reported today. Employment grew in professional and business services, in health care, and in mining and logging.

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Energy Futures Failed to Follow Through on Major Sell-Off

On April 3, 2014 by TradingDesk
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Energy futures failed to follow through on their threat of a major sell-off Wednesday, despite more signals from Libyan officials that a solution to reopen much of their shuttered infrastructure was in the works. The S&P 500 reached a new record high, which seemed to coordinate with the bounce in energy futures, suggesting that the correlation between asset classes is not completely gone, although it has been dormant for some time.

The situation for prices is now very similar to what we saw 2 weeks ago when both RBOB and ULSD were near the breaking point of a drop into the $2.70s but sellers could not find enough conviction to make the move. The difference this time around is that ULSD and Brent futures have broken below long time trend lines, which creates a higher likelihood that we could see much lower prices in the near future. Support is layered in the charts between $2.80 and $2.85, which will provide a good test for refined products to end the week.

According to the DOE, there is plenty of crude oil in the US, as is shown in the Total US Crude stocks chart below, but the Nymex delivery hub for WTI in Cushing OK has fallen to its lowest level since 2009, as the industry has raced to find alternate storage and delivery methods for the surging domestic output of crude.

The last chart below shows Ethanol futures, which appear to have finally burst their bubble, dropping 32 cents yesterday. Tight supplies, primarily due to a backlog of rail cars, still exists in many markets however, with several regions still trading north of $4/gallon. Producers raised their output to their highest levels ever for this time of year – presumably to take advantage of the record high prices – which should help alleviate the total supply issue this summer, but it may not matter unless the rail situation is fixed.

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Market Update (3)

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DOE Weekly Report

On April 2, 2014 by TradingDesk
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DOE Weekly Report

Most Major Petroleum Futures Contracts Dragged to Lowest Levels of the Year

On April 2, 2014 by TradingDesk
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Refined product prices have dropped a dime so far this week, as a combination of bearish technical and fundamental influences combined to drag most of the major petroleum futures contracts to their lowest levels of the year.

A Libyan rebel group has reportedly agreed to terms with the government to resume operations in several of the locations shut for nearly a year due to protests, which has the potential of returning nearly a million barrels/day of crude to the global market. Skeptics warn that these stories have been floated continuously for months, with little to show in the way of progress. Several stories have also emerged that suggest it’s unlikely that the tensions in Ukraine will have any impact on oil products, which appears to be helping push Brent crude to its lows of the years on both an outright basis, and in relation to WTI.

Once technical support around $2.90 broke down for RBOB and ULSD, the follow-through was swift, and both products are now facing their next round of tests in the mid to low $2.80s. If these levels fail to hold, both contracts look to target $2.70, and close the book on the 2014 spring rally. Although WTI crude futures are holding just below $100/barrel, cash prices around the US are dropping, as physical supplies ease outside of the Cushing OK hub, and new bottlenecks for supply emerge. Conversely, not all regions will see relief from lofty prices due to the latest move in futures. Yesterday was the first trading day for summer-spec conventional gasoline in the gulf coast, so some markets will actually see cash increases this week as terminals convert to a lower RVP product.

With such heavy selling to begin the week, the price action over the next few days becomes critical. If a short-covering bounce stalls the move, we could see a new period of consolidation. If however the net long speculative positions (which have remained near record highs for weeks) are forced to bail out, the selling could become extreme.

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Energy Futures Remain Stuck in Sideways Trading Range

On April 1, 2014 by TradingDesk
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Energy prices finished the first quarter of 2014 trading on a weak note, but remain stuck in the sideways trading range. As we enter the 2nd quarter, the range of $2.90-$3.00 will be critical for both RBOB and ULSD in determining future direction.

A delicate balance between supply concerns in and around the Ukraine/Russia, Libya, Nigeria and Iraq will help keep sellers cautious as we approach the summer months, while bearish influences of surging US crude production and waning global demand will battle to push prices lower. The graph below shows how several major assets have fared so far this year.

Meanwhile, as petroleum-based energy products remain stuck in neutral, Ethanol prices have now reached their highest levels since 2006, when the elimination of MTBE as an oxygenate caught the market flat-footed. Many expect that these prices will collapse, as they have done following each prior price spike, although few are willing to bet when that will occur.

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CBOT Ethanol Futures

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Prices Pulling Back Fractionally This Morning

On March 31, 2014 by TradingDesk
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Energy prices finished last week on a strong note, with refined products finally able to break above their respective 14 day moving averages (which had stifled rallies in 4 of the 5 previous trading sessions) on the heels of fresh tensions around the Ukraine. Prices are pulling back fractionally this morning as there was not an escalation over the weekend as many had feared. Prices are now firmly set in a range between $2.90 and $3 for both RBOB and ULSD, and the direction we break out of this range in may dictate the price action for the next few weeks.

Fundamentally, the global outlook for energy supplies remains somewhat soft, as Iraq and Iran were both reported to have pumped more oil than expected over the past few months, offsetting the output losses from Libya.

Speculative positions in energy futures & options were little changed last week. WTI and Brent held their net long positions at or near seasonal highs – betting on higher prices – while RBOB and ULSD held near their average net-length for this time of year.

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Market Update (3)

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Energy Prices Continue to Consolidate

On March 26, 2014 by TradingDesk
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Energy prices continue to consolidate (go nowhere) after an early morning rally was wiped out in the afternoon for the 3rd straight trading session. The pattern continues today as both RBOB and ULSD futures are moving fractionally higher towards their 14 day moving averages – the level that has held back each attempted advance so far.

Traders seem to be conflicted over potentially bullish conflicts in Ukraine, Libya, and this morning’s news that Nigeria was cutting crude output again, facing off against bearish influences of stagnant global demand and increasing production of energy products. Price action over the next few weeks – will we rally back above $3 for RBOB and ULSD, or test the year’s lows – may set the tone for trading through the summer.

We’ll be traveling the next few days. Perhaps when we return there will be something more interesting to write about. Enjoy the rest of the week.

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Refined Product Futures Mirror the Direction of US Equities

On March 25, 2014 by TradingDesk
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Refined product futures had their second “head fake” trading session in a row Monday, moving higher in the morning, only to stall out at technical resistance levels and move lower in the afternoon. The action seemed to mirror the direction of US Equities, and suggests that energy prices are searching for direction from outside sources as they consolidate. The 14 day MA has become the resistance level of choice for both RBOB and ULSD futures, and is being tested again this morning, and is likely to be the deciding factor between a run at $3 for both products, or a test of new lows as we end the month.

The coast guard is preparing to re-open the Houston Ship Channel, which should limit any price impact of this weekend’s spill, despite the fact that Exxon confirmed its Baytown refinery was forced to cut runs as a result of the delay in ships available.

Ethanol continues to steal the show in terms of price action, adding another 20 cents to spot values in Chicago yesterday, as the country’s hub races to catch up with coastal markets that had been trading north of $3 for weeks as the country struggles to catch up with deliveries due to rail delays and a lack of cars.

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Market Update (3)

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