Potential for Price Spikes Is Strong

On January 29, 2013 by TradingDesk

Yesterday’s headline that Hess was planning to shut its Port Reading NJ refinery sent RBOB prices up nearly 6 cents, marking their 8th consecutive day of gains. The breakout above technical resistance makes a strong case that gasoline prices bottomed out in December and are now in the midst of their spring rally. 2 years ago, RBOB rallied from a December Low in the $2.20 range, to a high in May of $3.48. Last year, the contract bottomed near $2.48 in December, and rallied to a high in April of $3.44. While it may be hard to fathom another 55 cent increase on top of the 35 cent gains we’ve seen the past 6 weeks, history – and the move to lower RVP product – do support the theory. Meanwhile, WTI is also breaking out and setting up a test of $100, while HO continues to lag, unwilling to break the pivotal $3.10 level.

Already in the past hour, an attempt to sell-off in RBOB has been reversed suggesting that the conviction to step in front of a runaway gasoline train is lacking. While the country has plenty of gasoline in inventory, we’re still struggling to figure out how to get the excess from the Gulf Coast to fill the hole along the eastern seaboard. As long as this condition remains, and gasoline futures are still delivered in New York Harbor, the potential for price spikes is strong.

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