Refined Product Futures Taking a Break From Their Rally

On December 30, 2013 by TradingDesk

Refined product futures are taking a break from their December rally this morning, with both RBOB and ULSD down ½%, following 20 cent rallies for each contract over the past 7 trading sessions. Each contract is in a technical “breakout” signaling higher prices to come, although some skepticism remains as the bulk of the move higher happened on light holiday-induced trading volumes. Both contracts are in “over-bought” territory at the moment, leaving them susceptible to a short term correction, although charts continue to favor higher prices in the new year.

Friday’s DOE report showed that stockpiles for crude and products continued to drop ahead of year end, despite refiners running 900mb/day more crude than they did a year ago, nearly 2 million b/day over the 5 year average. Although domestic demand has shown signs of modest growth over the past couple of months, the story remains the US export market, as the total Import/Export number for refined products neared a net export figure of 2 million b/d for the first time ever. As US crude production swells beyond the current 25-year highs, expect the debate over allowing petroleum to be exported before being refined to heat up in 2014.

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Market Update

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