Energy Market Updates

Front month Heat continues to find comfort above the 2.95 level as traders weigh the recent barrage of news.  Earlier in the week, many feared an almost inevitable Government shutdown, but those fears were erased late Wednesday as a House Bill passed that would fund activities for the next several weeks.  While Inventories were in my opinion somewhat Bearish, the news didn't take so well yesterday and pushed futures up slightly ahead of today's report that showed the US economic growth rate fell in line with expectations with an increase of 2.5%.  Additionally, new applications for unemployment benefits fell by roughly 5000 to 305,000.  The Bullish overtures of a growing economy almost always will spur a rise in Commodity futures.  The Syrian problem continues to drag on in a political stalemate as Russia successfully blocked a UN resolution which would have authorized military strikes.    While news may be what most are pointing to as the driver, one must give the technical analyst his due.  The Failure of front month HO to settle below the 2.95 mark has spurred buying over  the last two sessions.  This level continues to be a huge support area.  At the Close, Crude gained .37 to $103.03, RBOB added .0321 to $2.7050 and HO settles up .0306 to $3.0037

As news continually breaks on developments on the Syrian conflict and the potential implications of US or other world power intervention in the region, stocks are dropping and commodities are going through the roof.

All news today was nothing but feed for the Bulls that have been in control of the pits over the last week.  After HO dipped below 2.95 late last week, buying has come back with force.  Today was strong out of the gate and while RBOB was tamed slightly, HO kept right on rolling.  NOAA models now show Tropical Storm Erin churning in the mid Atlantic with an expected path set on Puerto Rico for sometime late next week.  First storm of the season always brings the buyers out.  Data on the economic front showed the US had the lowest unemployment claims in just over six years.  While this is good for the economy, not so good for Future pricing.  Along side that, most now expect the FED to significantly slow down their Bond buying program over the next sixty days as the economy shows signs of improvement.  Finally, the continued and recently heightened unrest in Egypt, has many concerned over the regions safety.  Egypt largely controls the Suez canal which is a vital shipping lane for Crude barges, anything that can remotely affect Crude shipments will push futures higher.  Still optimism remains as RBOB shrugged off the news and was only able to muster a 15 point gain to close at $2.9845, while HO jumped another .0250 to $3.0728 ( the high end of the wide range  we have been in) .  Crude added .48 to $107.33.  I stay optimistic for lower prices coming as the semi mixed close is always a key point to momentum swings.

An Ounce of Prevention is Better than a Pound of Cure!!

July 16th - Energy Bulls showed their muscle today by posting solid gains after an ever so slight dip yesterday.  On the back of an early weak dollar, RBOB and HO were up almost .03 cents in the early morning.  After what appeared to be some resistance touching, futures slid to even shortly after Open outcry, even posting some negative numbers.  The slide was short-lived as traders began to focus on this weeks inventory levels that are projected to show a draw of roughly 3mbls of Crude, signaling a rising demand.  Small refinery news and traders rolling positions into AUG also contributed to today's rise.   Personally, I have said for months that HO is stuck in this large new normal range of 2.75 to 3.05, being at the top of that range now, one has to speculate at how much higher we can go.  At the close, Crude was able to shed some pounds finishing down .32 to $106.00, HO added .0208 to $3.0469 and RBOB gained .0314 to $3.1343.  RBOB appears to be driving the market so Wednesdays price action will be intresting.

Bears were out in full force today (actually saw them hit after the close on Monday) as all eyes were watching election results in Italy.  No clear cut winner has been announced thus casting doubt and uncertainty on recently passed austerity measures.   The effect saw the US Dollar rise against the World basket forcing Commodities to fall harder than Tom Brady's Agents Commission check.  Adding to the sell off was increasingly better news from the housing market with December values showing a .2% increase and 6.8% increase year on year.  All this and as I walked into a lunch saw Fed Chief Bernanke on a big screen TV saying the economy is far better off than in recent years and that the FED is currently looking at ways to end its quantitative easing policies.  Today had a flurry of news to push pricing down, but I still hang my hat on  the saying "high prices is the cure for high prices"  as we exit the heating season in the Northeast and some retail stations above $4.00 a  gallon,  some would say the US economy would struggle to support these energy costs.  At the close, Crude lost .48 to $92.63, HEAT fell .0672 to $3.0317 and RBOB tumbled .0795 to $2.9816. 

The NYMEX continued strong gains as most early risers thought we would see a reversal of yesterdays spike. At 5 am, RBOB was down almost .03 and HO was down about a penny. It had me thinking that yesterdays reaction to the Hess announcement that it was closing their New Jersey refinery was somewhat overdone. But as the rest of the world woke up, and saw the Dollar struggling, Futures made an about face at the open. While consumer confidence was reported to be at the lowest levels since late 2011 (maybe an effect of Americans seeing less in their checks this month), Home values were reported to see roughly a 5.5% increase in values year on year. Back to the notion of a gasoline shortage, with there being only two major refineries to serve the Eastcoast, it is easy to see how some can predict a long term crunch. My hunch is higher prices will solve that problem eventually. Still, HO has risen above the top end of the range we have been stuck in since October, closing up .0476 to 3.1092, RBOB added.0386 to 2.9734 and Crude gained $1.13 to $97.57. All ahead of the relatively tropical forecast for the next two days. (shown below)