DOE Report

On May 23, 2012 by TradingDesk
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Another Red Day

On May 23, 2012 by TradingDesk
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Once again, a nice rally in risk assets was snuffed out yesterday, as negative headlines from Europe – this time the former Greek prime minister saying that preparations for leaving the Euro zone were being discussed – threw cold water on what had been a nice 2 day rally. The negative sentiment carried through the Asian and European sessions overnight, and markets in the US are shaping up for another red day as a result. The EUR/USD dropped to its lowest level in 2 years overnight, which could prove the catalyst for the next major move in equity and commodity markets.

Energy prices are selling modestly today, along with stocks, aided by news that Iran is “playing nice” with the IAEA and bureaucrats from several major economic powers who will be meeting with Iranian leaders in Baghdad today. While no actual agreements are expected from the meeting, the lack of sabre rattling has put fears of a supply disruption on the back burner for now. For those keeping score, the supply risk fears had dominated the first 3 months of the year, but now global economic concerns have owned the past 2. In broad terms, these two issues remain the major drivers of energy prices for the foreseeable future.

RBOB, HO, WTI and Brent futures all seem poised to test their lows for the year over the next few weeks, with little fundamentally or technically standing in their way. A break below $2.85 for RB, and $2.82 for HO should signal another dime of losses before finding another resting point.

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Technical Outlook Favors More Selling

On May 22, 2012 by TradingDesk
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Global markets had a strong performance Monday, as hope was renewed that policy decisions could avoid a Greek exit of the Euro zone, and marked the first positive trading day in 7 for many equities. The momentum carried into the overnight trading session with both European and Asian shares rallying, although the mood was tempered by a downgrade of Japan’s credit rating by Fitch, and by another expensive Spanish debt auction.

Energy prices joined in on the rally Monday, but have been held in check today on news that Iran is ready to sign an agreement with the IAEA on its nuclear production, and separately plans to build a new giant export terminal for its oil production. While the pop in prices Monday served to ease a severely oversold condition in refined products, which had each dropped more than 30 cents over the past 3 weeks, the technical outlook continues to favor more selling.

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US Equity Prices Moving Fractionally Higher

On May 21, 2012 by TradingDesk
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US Equity prices are moving fractionally higher, following their worst weekly performance of the year. Pledges from the G8 meeting this weekend has brought renewed optimism that the European crisis can be solved, and promises from Chinese officials to stimulate their slowing economy are helping to push values into the green.

With little economic news on the schedule, energy prices are taking their cue from stocks, and trying to bounce from the lowest levels in months. Technically, all energy futures are severely over-sold, making us due to see a bounce. The mid $2.90 range will be key resistance to the upside for both RBOB and HO prices. If products fail to move through this range this week, expect lower prices in the near future as the overall outlook remains bearish.

The CFTC commitment of trader’s report from Friday shows that speculative long interest has been cut back sharply in the energy markets, but that a significant volume of open interest remains, particularly in gasoline futures. The movement of this money over the next several weeks will play a significant role in determining whether energy prices can bounce from recent lows, or if we’ll head to the $2.50 range like we did last year.

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Rolling In The Deep

On May 18, 2012 by TradingDesk
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Markets are digging in their heels this morning, trying to recover from a relentless day of selling Thursday. Yesterday’s action was a confirming follow-through on the technical support breakdowns across several markets, and a spike in gold prices suggests a flight to safety by investors across the globe. Overnight the selling picked up steam in Europe and Asia following rating downgrades of 16 Spanish banks, but most markets have since recovered on rumors that the ECB is stepping in to support the Euro and ban short selling on financial stocks, and on rumors that Facebook shares will cure global warming.

Energy prices were led lower by Brent crude yesterday, which promptly dropped $3 after breaking its 3-year-old bull trend line at $110. WTI was supported by news that the Seaway pipeline was sending its first deliveries south from Cushing OK into Houston’s refining hub. Both RBOB and HO dropped sharply, and while they’re due for a bounce to relieve an oversold condition, charts suggest we’re heading for the mid $2.70s over the next couple of weeks.

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Too Low For Euro

On May 17, 2012 by TradingDesk
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Once again, the Euro pulled the rug out from under a stock market rally yesterday, after news broke that the ECB had suspended transactions with several Greek banks. The action has carried through the overnight session as the Euro is now threatening to test its lows for the year and dragging global stock markets along with it. US stock markets have now broken through several key support levels on the chart which suggest more selling to come.

WTI and HO both settled at their lowest levels of the year yesterday, while RBOB continues to trade directly on its long term bull trend line. Brent crude opened trade below its trend line from a $36 low in December of 2008, which could be significant for refined products – which have been trading closer to the European grade of crude over the past year – and becomes just another in a long line of bearish factors weighing on prices.

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DOE Report

On May 16, 2012 by TradingDesk
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Strong Enough To Bend

On May 16, 2012 by TradingDesk
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Energy prices continue their bend-not-break trading pattern today, with WTI leading the way after yesterday’s API report showed yet another huge build in crude inventories, while products continue their typical seasonal drawdown. Values are well off their lows however, following the lead of the Euro, which bounced from multi-month lows on rumors that Germany and France – under new management – are planning to do something to save Greece (again) which has now turned its government over to a “caretaker” until new elections can be held in June. You couldn’t make this stuff up if you tried.

While the Euro-drama continues to drive much of the action, concerns over a slowdown in China and India continue to crop up, most recently in the forward demand outlook from the world’s largest hard commodity producer BHP Billiton. All of these concerns paint a bleak fundamental picture for oil and refined products, and the technical view is equally bearish. RBOB and HO are both very near their $2.90 support ranges, with a break here targeting $2.75.

Watch Padd 3 inventories in today’s DOE report. Distillate stocks in particular have been dwindling due to surging exports, a trend that provides the silver lining for domestic fundamentals.

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We’re Livin’ On The Edge

On May 15, 2012 by TradingDesk
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Energy markets are pulling back from the edge of a cliff again this morning, taking the lead from US and European stock markets which are hopeful that positive GDP data from Germany will be enough to stem the tide of selling triggered by fears over Greece and Spain. US Economic data was positive, although not overwhelming, as consumer spending increased fractionally, CPI was flat (thanks again to cooling gasoline prices) and the NY Fed Manufacturing survey showed growth. Volume thus far has been light however, as it appears traders may lack conviction to the long side after two weeks of relentless selling.

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The Euro Is Leading Markets Lower

On May 14, 2012 by TradingDesk
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The Euro is leading markets lower this morning, as Greece continues to crumble and Spanish and Italian debt costs continue to rise. A move by the Chinese central bank to lower the reserve requirements for its banks – following a string of weak economic data – has done little to slow the selling, as this is the 3rd time in 6 months that the move has been made. As the EUR/USD now touches its lowest levels since January, several commodity and stock markets are hitting multi-month lows as well.

Heating oil has now given back all of its gains for the year, down 39 cents from its late February high. If the drop holds, the next target on the charts is a range of support in the mid $2.70s, that held up 5 times in 2011. WTI is now down $12 for the month of May, and with chart support being wiped out almost daily, it is certainly possible that we could see crude in the $80 range before the selling is done.

RBOB is holding up relatively well, managing to stay above key technical support levels despite the “risk off” mood in the markets, although it’s unlikely that the contract can hold up the rest of the energy complex on its own.

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