Rally in Energy Prices Stalls

On February 20, 2014 by TradingDesk

The rally in energy prices has stalled overnight, with each of the 4 major futures contracts dropping in sympathy with weakness in global equity markets. A drop in the February Chinese PMI report is taking much of the blame for the selling, although technical studies suggested that the market was overdue for a correction after 2 solid weeks of gains. Now that some selling is underway, look for short term support levels to determine if this is simply a brief pause in a larger bull rally, or the end of the run. $2.77 will be a key pivot point for RBOB, while ULSD will need to drop back below $3.10 after hitting $3.16 overnight.

The Brent/WTI spread has dropped to its lowest level in 6 months as Brent struggles to break through resistance at $110, and as several industry heavyweights have begun to lobby for a new benchmark for European crude due to the declining output – and relevance – of the North Sea oil fields. Today’s DOE report will be watched closely to determine how the US is holding up in the face of the worst winter in 20 years, with ULSD spreads and Natural Gas prices above $6 both suggesting that the healing process will take some time.

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Market Update (3)

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