Market Update 2/17/14

On February 17, 2014 by TradingDesk
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Market Update (3)

Energy Prices Fractionally in the Green

On February 14, 2014 by TradingDesk
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Refined product prices followed the lead of US stock markets Thursday, selling off early in the trading session, only to reverse course and end with modest gains for the day. The trend is continuing this morning, as both energy and equity prices are starting the day fractionally in the green.

The technical outlook has not changed for gasoline or diesel prices. RBOB futures maintain a bullish outlook, after again breaking above the 200 day moving average, with the next stop 8 cents above current values. ULSD has a neutral outlook at the moment, but is testing resistance at $3.05, with a break setting up another move into the $3.10-$3.15 range. Prompt values continue to be extremely volatile, as traders try to sort out the supply mess in PADD 1, with news yesterday that several cargoes of ULSD to be imported changing course due to plunging NY Harbor cash prices sending the March/April ULSD spread spiking towards 5 cents again.

WTI and Brent are both consolidating around pivotal technical levels around $100 and $108 respectively. With little in the way of headlines expected today, and many still digging out of the latest winter storm, it may be a quiet day of trading. That said, there’s a full moon tonight, and it’s Valentine’s day, so anything could happen.

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Rally in Gasoline Prices Comes to a Halt

On February 13, 2014 by TradingDesk
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Weak demand figures reported by the DOE, and a winter storm which is preventing driving across much of the East Coast, have tag-teamed to halt the rally in gasoline prices this week. There have not yet been any reports of disruptions to refineries or other infrastructure – particularly the Colonial pipeline – despite the weather, so this latest storm has the potential to actually help heal the desperate diesel supply situation in the region. The DOE report once again highlighted the struggle the country is facing moving ULSD from the amply supplied PADD 3 refining region into amply populated PADD 1 region.

Global equities are selling off overnight, which appears to be weighing on both Brent and WTI crude, as the correlation between daily movements in equity and energy markets has strengthened over the past few weeks.

Looking forward, the trend for RBOB gasoline remains higher, despite a 7 cent pull-back from yesterday’s highs and a failure to hold above the 200 day MA, while ULSD values are stuck in neutral in a narrow range between $3 and $3.05.

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Market Update (3)

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DOE Weekly Report

On February 12, 2014 by TradingDesk
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DOE Weekly Report

RBOB Gasoline Continues to Push Higher

On February 12, 2014 by TradingDesk
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RBOB gasoline continues to push higher, buoyed by both seasonal and technical influences, and has just breached its 200 day MA. If prices can hold above that key level of resistance, the March contract has an upside objective of $2.85, which would complete the “W” trading pattern that began in December, while the forward months should move north of $3. Ethanol RINs have surged past 50 cents this week, which is adding to the bullish tone for RBOB prices as it will discourage gasoline imports – and encourage exports – to avoid the costly RFS obligation associated with producing or importing gasoline in the US. A delay in the EPA’s ruling on 2014 RIN obligations, and an open export window to Europe have taken most of the credit for the surge in RIN values, but several investment houses have released reports suggesting this is a short term move, and not a repeat of last year’s wild run north of $1.40/RIN.

ULSD values are moving modestly higher, but are lagging the strength in the other contracts. Technical studies remain neutral for diesel prices, despite another winter storm hitting the East Coast that should be bullish for diesel demand – particularly since the region’s natural gas infrastructure has proven woefully inefficient during this stretch of harsh weather – and bearish for gasoline demand from Georgia to New York with many areas expecting a foot of snow.

Both WTI and Brent are moving higher this morning, aided by another draw in US Stocks reported last night by the API, and on a report that Chinese imports of crude are accelerating once again.

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Market Update (3)

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Refined Products Back Off Recent Rally

On February 11, 2014 by TradingDesk
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Refined products backed off their recent rally Monday, as news of pending imports into the New York harbor crushed prompt diesel prices, despite another round of winter weather hitting the eastern seaboard. RBOB has already erased yesterday’s losses overnight however, providing more evidence that we may be witnessing the early stages of a spring rally.

WTI settled above $100 for the first time in 2014, although some caution is warranted as several “overbought” signals are flashing on the charts, and the last time WTI broke $100, it dropped by $10/barrel over the next 8 trading sessions. The spread between Brent and WTI has narrowed considerably over the past few weeks, which could cause some change in the US refining picture, as we approach what is scheduled to be a busy maintenance period in March.

Yesterday’s news that the Enterprise TEPPCO pipeline was forced by the FERC to prioritize shipments of propane to try and salvage a disastrous supply situation in the north east had little impact on refined product prices in the region. For now, markets are still pricing outages as a short term event that should heal by the end of the month.

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Market Update (3)

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Spring Has Sprung For Gasoline Prices

On February 10, 2014 by TradingDesk
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It appears that spring has sprung for gasoline prices, after RBOB futures gained 15 cents in the past 3 trading sessions, despite a lack of supportive fundamental news. The next stop for the March contract (which has the less-restrictive RVP spec) appears to be $2.85. Technical indicators are almost all pointing to higher numbers to come, which should bring the low-rvp contracts above $3, with a move into the $3.20 range possible over the next few months.

ULSD prices are also poised to continue a rally, despite a minor pullback overnight, after having broken through technical resistance at $3 Friday. There are pockets of further resistance in 5 cent increments, so $3.05/$3.10 and $3.15 should all be good barriers to the upside. Demand for heating fuels, including ULSD, continues to be a major story across the eastern half of the US. The FERC, for the first time in history, used its emergency authority to order the Enterprise pipeline system to prioritize propane shipments on its TEPPCO line. No word yet on how this may impact gasoline and diesel shipments along that line, but the timing is especially poor given that the pipeline was forced to shut for nearly a full day over the weekend due to operational issues.

Investment dollars poured into ULSD and WTI futures, while positions in RBOB and Brent were trimmed. The Net Long bias for WTI is now reaching record-high levels, and should keep the focus on the Brent/WTI spread (which dipped to 4 month lows last week) in the forefront of the price action for now.

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Market Update (3)

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Whiplash Trading Poised to Continue

On February 7, 2014 by TradingDesk
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Energy and equity markets attempted to rally overnight, and have seen some wild swings in the past few minutes following the release of the January non-farm payroll report, which showed another month of stagnant employment growth. The wild action appears to suggest that the 2014 pattern of whiplash trading is poised to continue.

RBOB gasoline futures tested $2.70 overnight – just 3 days after briefly trading below $2.60 – and have the potential of forming a bullish “W” pattern targeting $2.85 should this resistance level fall. If we are in fact witnessing the start of a spring rally, historical data (specifically an average increase of 25% or more) suggests prices may rise to $3.25.

ULSD prices continue to consolidate around the $3 mark, torn between an extremely tight prompt market and forward values trading as much as 45 cents below the march contract price. The near term outlook remains mixed, but longer term charts show that the upward trend from 2012 is still intact and another push to $3.20 is possible.

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Market Update (3)

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

THE EMPLOYMENT SITUATION — JANUARY 2014

 

 

Total nonfarm payroll employment rose by 113,000 in January, and the unemployment rate was little changed at 6.6 percent, the U.S. Bureau of Labor Statistics reported today.  Employment grew in construction, manufacturing, wholesale trade, and mining.

Table A

Diesel Stocks Continue to Shock

On February 6, 2014 by TradingDesk
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Diesel stocks – or the lack thereof – continue to shock as levels across PADD 1 are now 33% below 1 year ago, and more than 50% below their 5 year average, just in time for another round of winter storms to hit the East Coast. For many consumers, physical shortages in the region – similar to propane and natural gas consumers in other parts of the country – have reached desperation levels. Meanwhile, gasoline stocks continue to hold near record high levels for this time of year, as output remains high and the same storms that have caused diesel demand to spike have limited gasoline consumption.

So, naturally, gasoline prices have rallied 7 cents in the past 24 hours while diesel prices are up only 2 cents. It’s impossible to say what exactly is causing this type of counter-intuitive price action, but there is a possibility that since $2.60 held support for RBOB, and since we are in the seasonal window for bottoming gasoline prices, that we are witnessing the start of the spring rally. The first major hurdle to confirm this suspicion will be at the 50 day MA just below $2.68, which has already repelled one overnight rally. Meanwhile, if ULSD prices can hold above the $3 mark, there is little standing in their way technically or fundamentally, from another rally into the $3.20s.

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Market Update (3)

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DOE Weekly Report

On February 5, 2014 by TradingDesk
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DOE Weekly Report

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