DOE Weekly Report

On January 23, 2014 by TradingDesk
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DOE Weekly Report

Energy Complex Trades Higher

On January 23, 2014 by TradingDesk
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The energy complex traded higher yesterday in anticipation of a heating oil inventory draw which could be confirmed this morning by the delayed DOE release. RBOB and WTI each broke through an important resistance level yesterday; both settled up more than a percent, ULSD rallied in sympathy.

Physical gas prices also rallied in the face of what could be the “storm of the year”, according to experts, which could greatly hinder gasoline demand.

HO will meet some support-turned-resistance around the $3.06 level, RBOB will see some resistance levels around $2.70.

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Whiplash Trading Continues

On January 22, 2014 by TradingDesk
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The 2014 pattern of whiplash trading continued Tuesday, as both RBOB and ULSD saw nickel gains in the morning wiped out in the afternoon. The record high spread between February and March trading months in ULSD was also cut by a third during the afternoon sell-off, despite a new round of winter storms hitting the east coast. The volatility carried over into cash markets across the US, as traders struggled to offset the swings in futures prices.

The price swings have left technical indicators in limbo, with little clarity on future direction. Prices are attempting to rally this morning, but unless yesterday’s highs are broken, it seems that we’re in for another period of choppy, sideways action.

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ULSD Leading a Rally in Energy Prices

On January 21, 2014 by TradingDesk
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ULSD is leading a rally in energy prices this morning, as the East Coast of the US struggles to catch up on supplies following the record-setting cold snap 2 weeks ago, and as concerns over another winter storm begin to grow. A week ago, the spread between the February and March ULSD (HO) contracts was 1.5 cents. Today that spread stands at 9 cents, nearly doubling the record high since the contract changed to the ULSD specs a year ago.

Brent crude is also rallying by 1.5%, with an IEA report calling for global demand growth acceleration receiving credit for the move in several headlines. The balance of this week’s action will go a long way in determining if this latest move is the start of a spring rally, or just a technical bounce off of support levels delaying a further slide in prices.

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ULSD (HO) futures Prompt/2nd Month Spread

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Quiet Morning for Energy Prices

On January 20, 2014 by TradingDesk
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It’s a quiet morning for energy prices, as the Nymex floor will be closed today, along with banks across the country to celebrate MLK day. It may be fitting for the banks to have a day off from trading commodities, just as the debate heats up over ending a 10 year old rule that allows Wall Street banks to trade in physical commodity markets. The first chart below shows the spike in trading volatility over the decade in which banks began trading, and a major question for the next 10 years is whether or not we return to a period of lower volatility if those banks are forced out.

Last week was a tale of two markets in refined products as ULSD futures rallied off of technical support and ended up 8 cents for the week, while RBOB continued to slide, and ended lower by a nickel. What is notable for diesel prices is that the increase have come almost entirely in the prompt trading months, while forward months have actually continued to slide. The chart below shows the move over the past week/month/and year, to display that despite the rise over the past week in near-term values, ULSD prices 1 year forward have reached new lows. This type of action suggests the market is reacting to a short term issue, either fundamental or financial, and leaves the diesel market susceptible to another selloff when the squeeze is over.

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Energy Complex Sells Off

On January 17, 2014 by TradingDesk
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The energy complex sold off Thursday with only ULSD continuing yesterday’s rally settling up about half a cent; crude lost about a quarter, RBOB settled down a little over 3 cents. Crude traders seemed to pull back from their overreaction Wednesday as a couple reasons for the inventory draw (gulf weather and a barge back-up in Louisiana) may be remedied in the near future. Inclement weather continues to keep drivers off the road and RBOB prices down.

NYHB physical prices felt the reduced refinery runs, decrease in distillate stocks, and strong overseas distillate demand yesterday and posted a 3.5 cent gain at the NYMEX settle.

ULSD broke through a couple of technical resistances yesterday and is poised to test the $3.00 level which is the last bastion of hope from a 10-12 cent run-up. RBOB, settling at levels not seen since mid-November, has about a 10 cent range to play in ($2.55-$2.65) before finding some support/resistance and further price guidance.

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EIA Release Dominates Trading

On January 16, 2014 by TradingDesk
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With few headlines, the EIA release dominated trading yesterday; a sizeable draw in WTI inventory boosted the energy complex despite an almost equally large build in gas stocks. WTI settled with a 1.7% gain, the largest trading day seen since the first of the year, and brought ULSD futures along with it to settle at +1.5%. RBOB also posted a gain (+.0040) for the day in the face of decreased demand, specifically in PADD 1, due to cold weather. Refineries along the east coast also saw a staggering 12% drop in refinery runs last week rendering their total capacity at 75% utilization.

Technically speaking, yesterday may have thrown a wrench in the bears’ plan for lower prices in the short term with some indicators trying to favor the upside. HO will have to break through a few major resistance levels around the 2.99-3.00 range in order to continue yesterday’s run-up, RBOB faces similar resistance around 2.70.

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Market Update (3)

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DOE Weekly Report

On January 15, 2014 by TradingDesk
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DOE Weekly Report

Another Mixed Bag for Energy Prices

On January 15, 2014 by TradingDesk
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We are facing another mixed-bag day for energy prices, after Tuesday’s “bend, don’t break” trading, which has become a pattern so far in 2014.

RBOB futures are trying to lead another sell-off after the API reported a 5 million barrel build in US gasoline stockpiles last week, although the contract failed to stay below $2.60 after briefly breaching that level yesterday. ULSD and WTI meanwhile are holding on to modest gains, as that same report showed draws in stockpiles for both products, and technical support continues to hold. Brent crude continues to slide, reaching its lowest levels in more than 2 months, with many pointing to increased Libyan exports and the resumption of production in a major North Sea oil field for the move.

Technical studies continue to give mixed signals, but more indicators are rolling over to favor the bears near term. $2.60 and $2.90 remain the key pivot points for RBOB and ULSD respectively.

Today’s DOE report will be watched closely to determine how dramatically last week’s weather impacted the supply/demand equation. We saw a variety of issues at terminals and refineries across the eastern US, so a drop in runs is to be expected, but what remains unseen is how badly driving demand suffered during that time.

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Energy Markets on the Cusp of a Major Move Lower

On January 14, 2014 by TradingDesk
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Energy markets remain on the cusp of a major move lower, after selling off in sympathy with US equity markets Monday. RBOB gasoline futures led the move lower, erasing last week’s gains and touching their lowest levels of 2014. ULSD, WTI and Brent are all trading fractionally above their January lows however, and there is a limited window of time for values to break down before the seasonal influences of a traditional “Spring Rally” in energy prices take hold. Peg the $2.60 range for RBOB and $2.90 for ULSD as “must hold” levels if the bulls are to regain control.

Bearish influence continue to appear fundamentally, as Libya has returned to 600,000 bpd of output, from 250,000 a few weeks ago, and mediators work to restore the other half of the country’s production. Plans for an agreement on Iran’s nuclear program – and how subsequently to return some of its shuttered crude output to the market – seem to be progressing. US production of shale oil is scheduled to accelerate in the first quarter of 2014.

Political influences are also beginning to favor the bears. This week, the FED is expected to make its first formal move towards changing its regulations for large banks’ commodity trading operations. Although a final plan isn’t expected until early 2015, the mood against “too big to fail” banks being allowed to influence physical commodity markets has shifted notably in the past year, and could have long term consequences for prices as those banks exit the trading arena.

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Market Update (3)

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