A Tale of Two Energy Markets

On March 19, 2014 by TradingDesk

We have a tale of two energy markets this week, as Brent Crude and refined products continue their slide lower, while WTI prices have broken back north of $100. The action in price spreads and cash markets suggests the move in WTI is a function of a supply disruption, rather than a new trend for the complex to follow. The moves in refined products and Brent however are threatening long-term bull trend lines that could push prices dramatically lower this year. Today will be a busy day for news, with the DOE report out this morning, and the FOMC making their latest statement this afternoon. Industry focus will drop off dramatically tomorrow when the NCAA tournament begins, so we may well see March Madness in full form today.

WTI crude at Midland Texas was said to have traded as much as $20 per barrel below WTI at Cushing OK yesterday, after a pipeline that carries crude from Texas to Michigan was shut due to a leak, backing up supplies at the origin point. As the chart below shows, this discount is an all-time record, and – similar to how Canadian grades have priced over the past few years – shows how vulnerable prices can be based on their location and the infrastructure available to bring that product to market.

JP Morgan is reportedly selling its physical commodities unit to Mercuria. This is the latest in a string of banks that have exited the space in the face of rising regulatory pressures and diminishing returns.

More detail from Reuters on the banks exiting the physical commodities arena.

http://in.reuters.com/article/2014/02/05/banks-commodities-jpmorgan-idINL2N0L51PO20140205

CLICK HERE for a PDF of today’s charts

Market Update (3)

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