Spring Has Sprung For Gasoline Prices

On February 10, 2014 by TradingDesk

It appears that spring has sprung for gasoline prices, after RBOB futures gained 15 cents in the past 3 trading sessions, despite a lack of supportive fundamental news. The next stop for the March contract (which has the less-restrictive RVP spec) appears to be $2.85. Technical indicators are almost all pointing to higher numbers to come, which should bring the low-rvp contracts above $3, with a move into the $3.20 range possible over the next few months.

ULSD prices are also poised to continue a rally, despite a minor pullback overnight, after having broken through technical resistance at $3 Friday. There are pockets of further resistance in 5 cent increments, so $3.05/$3.10 and $3.15 should all be good barriers to the upside. Demand for heating fuels, including ULSD, continues to be a major story across the eastern half of the US. The FERC, for the first time in history, used its emergency authority to order the Enterprise pipeline system to prioritize propane shipments on its TEPPCO line. No word yet on how this may impact gasoline and diesel shipments along that line, but the timing is especially poor given that the pipeline was forced to shut for nearly a full day over the weekend due to operational issues.

Investment dollars poured into ULSD and WTI futures, while positions in RBOB and Brent were trimmed. The Net Long bias for WTI is now reaching record-high levels, and should keep the focus on the Brent/WTI spread (which dipped to 4 month lows last week) in the forefront of the price action for now.

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