Economic Concerns Pushing The Dollar Higher

On March 22, 2012 by TradingDesk
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Economic concerns are pushing the dollar higher, and many global stock and commodity markets lower this morning, following weak manufacturing reports out of China and Europe. Downtrends in these data sets over the past few weeks has the energy market struggling choose between two evils, weak demand or supply disruptions.

Yesterday’s headline that the Cushing to Houston section of the Keystone pipeline would be “fast tracked” put spread reversals in the spotlight, as WTI gained while Brent and product prices finished with small losses. The technical outlook remains stuck in range-bound mode, although the slip up in stock prices we’ve had this week does hint that we’ll test the lower end of this range first.

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DOE Weekly Inventory Report

On March 21, 2012 by TradingDesk
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CLICK HERE for this week’s Department of Energy inventory report.

 

Energy Prices Stuck

On March 21, 2012 by TradingDesk
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Energy prices remain stuck in their trading range, albeit modestly lower, after failing to follow through yet again at an early morning sell-off attempt yesterday. Brent Crude is leading refined products into the red, following exemptions to Iranian sanctions granted to 10 nations that lowered their import volumes, which is seen as a temporary reprieve from the constant tensions.

RBOB bounced off of its 14 day moving average for the 3rd time in a week yesterday, and remains above its 4-month old bull trend line. We are only a few cents away from breaking the highs for the year, which sets up a 10 cent run towards last spring’s peak. 3.3868 is the key number. HO looks relatively weak, with some technical studies rolling over into bearish territory and its trend line breaking down last week. Key support for HO comes in around $3.17, with a break below that level targeting $3.05. There are still record amounts of money sitting in the energy contracts, so expect choppy action as traders position themselves anticipating a breakout of our recent range.

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Slowing Demand and Supply Reassurances Impact Energy Prices So Far This Morning.

On March 20, 2012 by TradingDesk
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Slowing Chinese demand, noted by BHP Billiton, and supply reassurances from Saudi Arabia have taken 1% out of energy prices so far this morning. China also announced it would raise gasoline prices by 7%, which again raises the issue that a majority of the “emerging market” demand that has been the driver of so much over the past several years is subsidized, putting the burden of high prices squarely on the governments’ shoulders. Price hikes in 2008 contributed to the eventual collapse in prices, we will see if they can do the same in 2012.

After failing to break upside resistance yesterday, products remain stuck in their trading range with a neutral technical outlook. Global equities are slipping this morning, which will probably dictate direction until energy can find a new trend to follow.

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CPI Sparks Rally

On March 19, 2012 by TradingDesk
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Friday’s CPI report sparked a dollar sell-off, the rationale being that since 80% of the inflation was caused by gasoline prices – which the FED considers transitory and discounts in its analysis – that monetary easing was more likely to come this year. The weaker dollar started pushing energy prices higher early on, and then several headlines raising new concerns about conflict with Iran pushed products up 6-7 cents.

Global equity markets are slipping this morning after another weak housing report from China. Apple’s announcement that they’ve authorized a stock buy-back plan, and will issue the company’s first dividend in Q4 was good for a momentary bounce – RBOB gained a penny on the news, proving just how interconnected these markets really are.

Charts continue to show consolidation in crude and products, and with the stock market sitting near fresh 4 year highs, and the Middle East drama not showing signs of cooling off, the bulls seem to remain in control.

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Misleading Headlines Prompt Temporary Energy Selloff

On March 16, 2012 by TradingDesk
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Yesterday saw a fast selloff in energy prices following a misleading Reuters headline suggesting that the US was prepared to release crude oil from the Strategic Petroleum Reserve (SPR). Although the details were denied by the State Department, it is clear that energy prices have become a political football and that the automated headline-reading trading programs are still working on their grammar.

Prices are moving higher today, in step with equity markets. The CPI for February increased by .4%, and the labor department said that gasoline prices accounted for over 80 percent of that rise. Technical studies remain confused, but turning over into bearish territory. It will be interesting to see how the record long speculative interest in RBOB handles the first significant round of margin calls today, following yesterday’s sell off. The reaction may say a lot about the strength behind the fast money which has helped push prices up 65 cents so far this year.

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A Quiet Morning So Far…

On March 15, 2012 by TradingDesk
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It’s a quiet morning of trading so far, as it seems most Wall Street types are busy trying erase Syracuse from their brackets. Weekly Jobless claims, PPI and NY Fed manufacturing readings released this morning all came in near expectations and haven’t done anything to move markets.

The Euro was selling off overnight, but bounced slightly at 1.30 after Spain held a successful bond auction, which helped folks ignore reports that home prices there fell 11% on the year and employment surpassed 20%.

Energy prices are mixed, with European grades off slightly which is dragging RBOB and HO lower, but WTI is rebounding after yesterday’s DOE induced sell-off. Products remain stuck in the upper end of their trading ranges and the technical outlook is still neutral. We still have another month until we get to our seasonal peaking window on gasoline prices, and it appears our typical pattern will hold again.

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Thunderstruck

On March 14, 2012 by TradingDesk
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Large US Banks stole the FED’s thunder Tuesday, announcing that they’d passed the central bank’s stress tests and would be increasing dividends and stock buy backs as a result. The FED, in an almost unheard of move, was forced to release its test results early – 15 of the 19 passed. US stock markets went on an afternoon tear on the news, having their best day of 2012, and finishing at their highest level in nearly 4 years.

Energy prices were tempered by a stronger dollar/weaker Euro and managed gains of less than 1% despite the big move in stocks. Both Saudi Arabia and Kuwait have again announced that they would increase production if Iranian oil is taken out of the market – but recent reports from the IEA and OECD suggest that spare oil production capacity is dropping to levels not seen since the rally to $147 in 2008.

Today’s DOE report is expected to show crude builds and product draws as refinery maintenance and run cuts due to weak economics on the gulf coast offset slumping product demand. Tech studies remain mixed, but RBOB is only 2 cents from breaking its highs for the year, which would leave it one headline away from racing to last year’s high.

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Markets Treading Water

On March 13, 2012 by TradingDesk
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Markets are treading water this morning, waiting eagerly for the FED’s policy statement this afternoon. While no immediate changes are expected, the language used by the market committee will be parsed in painful detail to find any hint about future plans for dropping cash from helicopters.

We’re sorting through several paradoxical headlines today, Italy revealed it entered a recession in 2011, but then had its strongest bond auction in 2 years. German manufacturing data continues to struggle, but its consumer confidence keeps rising. Weak Chinese economic data is now unveiling hopes of Chinese monetary easing and a stronger economy.

Adding to the conflicting sentiment, the USD index has broken above 80, which typically lends to cheaper commodity and stocks, but global equity markets are moving higher, pulling products into the green.

Energy markets are doing their part to add to the aimless behavior, having taken back most of yesterday’s losses as the contracts struggle to break out of their recent trading ranges and find direction.

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China Trade Deficit A Slight Drag On Futures.

On March 12, 2012 by TradingDesk
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Energy prices, along with most commodity futures, are off around 1% this morning after China reported its largest trade deficit in over a decade, which is the latest in a string of weaker economic data for the great consumer of raw materials and energy.

Currency and equity markets seem to be largely shrugging off the news, although some modest selling is taking place. Market watchers are eagerly watching to see what the repercussions will be of Friday’s announcement that Credit Default Swaps on Greek debt had been triggered, forcing payouts on billions of dollars-worth of contracts insuring against default. While the immediate consequences may be minimal, we’ve learned with Europe to simply wonder, “who’s next”.

CLICK HERE for a PDF of this morning’s chart.