Sell-Off Is Short Lived

On November 26, 2013 by TradingDesk

The “Agreement to try and make an Agreement” sell-off was short lived Monday, as Brent crude reversed course mid-day, and erased $3/barrel overnight gains. ULSD futures made a similar reversal, as traders doubted that the pact will have a lasting impact on supplies, actually trading in the green for a few minutes in the afternoon after losing 7 cents earlier in the session. RBOB meanwhile held onto losses, after Phillips 66 announced that its Bayway NJ refinery was ramping up operations following a month of maintenance.

Expect volumes to drop off significantly today and tomorrow as the combination of Thanksgiving and a major winter storm keep traders away from their desks. Colonial Pipeline announced today that their operations have not been impacted by the storm, so this may be more of a hit to demand than to supply for much of the country. Florida on the other hand continues to struggle with vessel capacity, and the rough seas caused by this storm have already caused additional delays.

Charts are suggesting further upside for ULSD and Brent, while RBOB and WTI are showing some weakness. The first test for diesel futures will be $3.05, with a target of $3.20 if that level breaks. One note of caution is that some indicators are showing that the contract is overbought and due for a short-term correction. RBOB meanwhile is showing signs of having topped out during last week’s surge, and a test of $2.65 is coming, with a return to support at $2.50 likely should this level break.

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