WTI Crude Leading the Energy Complex Lower

On March 12, 2014 by TradingDesk

WTI Crude is leading the energy complex lower this morning, trading as low as $98.30, after breaking below $100/barrel (and its 200 day Moving Average) for the first time in a month yesterday. The accelerated selling after that technical support broke down suggests that we are witnessing some liquidation in the record net-long speculative position that was held in WTI futures and options last week. What remains to be seen is if selling will beget selling as margin calls are made later this morning. For now, refined products are holding up relatively well, losing only half of what WTI has given up on a percentage basis, and holding above technical support levels in the low $2.90s.

Brent crude is also showing relative strength (adding nearly $4/barrel to its premium over WTI this week) as the Libyan oil drama reaches new levels of insanity. Yesterday, the country’s prime minister was voted out of office after a foreign flagged crude tanker loaded at a rebel-held port and out-ran the country’s navy on its way out to sea. Although the reliability of news in the region leaves much to be desired, there is no mistaking the importance of the country’s crude exports that have kept 1 million barrels/day out of global markets since protests began last summer.

Meanwhile, uncertainty about China’s economy following a bond default continues to roil global equity markets, and threatens to push energy prices lower as the country remains the driving force in global demand growth for crude. So far, the impact has been seen more in copper markets, but energy traders will keep a close eye on the situation as bearish influences seem to be mounting this week.

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