On February 20, 2013 by TradingDesk

Refined product prices are slipping lower this morning, following Brent crude into the red after Saudi Arabia announced plans to ramp up oil production in Q2 after slowing rates through a winter season of weak demand. WTI is holding flat, benefitting from headlines of the oil market’s new obsession – the Seaway pipeline – will ramp up to 295mb/day in the near future. Full capacity of 400mb/day will not be reached until offloading facilities are upgraded to maintain pace with the pipe’s flow rate.

Heating Oil futures are down less than a penny, but the contract shows the most bearish technical outlook after the 14 day Moving average was breached yesterday, and an attempted rally stalled at that same point. With former support now turning into resistance, peg $3.15 the next support level, with a failure there setting up a 10 cent drop in prices. RBOB has set up a mini double-top at $3.16, and shows signs of returning to its early February trading range from $3-$3.05, before we roll to the low RVP April contract which is trading 19 cents higher. Unfortunately, unless both contracts fall back below the $3 mark, the larger trend remains up and the spring rally is intact.

Meanwhile, physical product markets remain quite confused, as the Gulf Coast gasoline prices are holding above the New York harbor, as aggressive export bidding has driven a 20 cent rally in basis values, on top of the gains in the RBOB futures contract. In normal circumstances it is rare for Gulf coast values to exceed New York – since much of the east coast supply comes from the gulf – and in the months since Hurricane Sandy, the premium for east coast barrels regularly topped 20 cents/gallon.

CLICK HERE for a PDF of this morning’s charts


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