The Daily Energy Technical Report 7.11.13

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This caused a huge upswell in futures that amounted to a 2.9% rise. August settled at the highest level in 15 months. The surprise draws in the DOE inventories precipitated the huge rise. Crude drew 9.8M barrels, gasoline drew 2.6M barrels, and just as important, Cushing drew 2.6M barrels. This meant that any market makers that were short were forced to bid the backwardation higher, which made for a depressing day for them. After 2 pm, when the FOMC minutes came out, crude oil pared its gains on the news that officials are divided regarding when to start tapering bond buying.

OPEC’s review of global oil demand was a bullish ingredient for the market. They see demand rebounding by 1M b/d next year, but warned about the possibility of geopolitical risk remaining in play. The OPEC outlook for pickup in demand was consistent with the Fed view for 2014, which calls for stronger growth.

WTI
WTI S2 S1 CLOSE R1 R2 TREND
DAILY 10421 10538 10652 10719 10875 UP
WEEKLY 9735 10071 10322 10719 11055 PEAK

 Daily Moving Averages: 21, 55, & 100: 98.27, 95.85 , 94.44

Weekly Moving Averages: 21, 55, & 100: 94.39 , 92.18 , 93 .55

Those that were short anything related to August were bugs on the windshield of the market Wednesday.

  • The sharp draw in the DOE inventories of nearly 10 million barrels had the bears running for cover any where they could find it.
  • Option market makers that sold calls last week at lower volatility levels found their Gamma exposure needed to be exited.
  • This market is not likely to correct significantly until August is off the board.
  • Aside from inventory levels, tropical storms are a factor in traders psychology as the hurricane season approaches.
  • Although It appears as if August did complete a leg to the upside at 106.66, it is only likely to give way to a correction for the early part of Thursday.
  • There will be initial support at 105.60 to 105.35. The minor pivot is 104.90.
  • We are a buyer of the dip.
  • This will be at the 105.40 level with a protective stop below 104.90.
  • From this setback August will then make its way to 107.10 to 107.30.
  • Ultimately however the objective is 108.50 to 108.75.

 

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crude 071113

 

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CRUDE WKLY 070813

BRENT
BRENT S2 S1 CLOSE R1 R2 TREND
DAILY 10491 10685 10851 10959 11060 UP
WEEKLY 10092 10474 10772 10959 11522 PEAK

Daily Moving Averages: 21, 55, & 100: 104.41 , 103.71 , 105.51

Weekly Moving Averages: 21, 55, & 100: 106.08 , 108 .37, 110.14

It appears that August completed a leg to the upside Wednesday.

  • While this is likely to give way to a minor correction, the trend will stay intact for another run later in the week or early next week.
  • Although there is minor support at 107.50, the strong support level for this pattern is 107.10 to 106.90. The pivot is 106.75.
  • The key pivot to the intraday chart is 104.90, but it is probable the above mentioned support zone holds.
  • We are a buyer of the dip. This will be at 107.10. The stop will be placed below 106.85
  • With a break of 108.66 August will stretch to 109.50 to 109.75. However, the ultimate objective for this phase is 110.60 to 111.00.
  • Aside from the factors supporting WTI, the Middle East and North African situations will impact this market more quickly than that of WTI were it not for the squeeze on the spreads.

 

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BRENT 071113

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BRENT WKLY 070813

WTI-BRENT
WTI-BRENT S2 S1 CLOSE R1 R2 TREND
DAILY -359 -252 -199 -166 -88 UP
WEEKLY -993 -765 -450 -279 0 PEAK

Daily Moving Averages: 21, 55, & 100: -4.09, -4.52 , -5.76

Weekly Moving Averages: 55, 100, & 200: -8.07 , -11.70 , –16.24

All those banks and brokerages that told their clients to sell the arb because oil is plentiful have egg on their face.

  • Unfortunately their clients are road kill.
  • Although there may be a mild pull back from the -1.65 to -1.50 zone, the pattern is not yet complete.
  • The sharp draw down in Cushing, 2.7 mb, exacerbated what was already a squeeze play.
  • Nevertheless, August is overbought and a correction can be expected.
  • However, we will look to buy the dip.
  • August will have an upside objective of -1.70 to -1.50.
  • Although we expect consolidation from that point, a fifteen minute settle above -1.50 will signal an advance above -1.00.
  • We will look to swing long with a drop to -3.00. The pivot to this position is -3.35.

 

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wti-brent 071113

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wti-brent wkly 070812

RBOB
RBOB S2 S1 CLOSE R1 R2 TREND
DAILY 29275 29610 30149 30470 30920 UP
WEEKLY 26970 27625 28968 29965 30780 PEAK

Daily Moving Averages: 21, 55, & 100: 2.8258, 2.9292 , 2.9057

Weekly Moving Averages: 21, 55, & 100: 2.302 , 2.8813 , 2.8758

We were bullish for Wednesday, but did not see this severe a move higher.

  • However, one of the supporting factors is the train derailment in Canada.
  • The tracks have been damaged considerably and that was bringing crude to the Irving refinery.
  • This is a largely a  gasoline production facility and will impact the East Coast supplies.
  • The summer driving demand also has fund money rolling into the market.
  • While it appears that August did complete a leg higher, more upside is likely following a minor dip.
  • The support for the retrace will hit the chart at 2.9650 to 2.96. This carries a pivot of 2.9540.
  • We are a buyer of the dip. This will be at 2.9615. the stop placed below 2.9540.
  • The key pivot to the daily chart is a daily settle below 2.9275, but we think this is unlikely.
  • August has an objective of 3.0450 to 3.50 for this next upswing.

 

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mogas 071113

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mogas wkly 070813

ETHANOL
ETHANOL S2 S1 CLOSE R1 R2 TREND
DAILY 2385 2415 2441 2480 2520 UP
WEEKLY 2165 2260 2392 2480 2580 CONGEST

Daily Moving Averages: 21, 55, & 100: 2.443, 2.543 , 2.508

Weekly Moving Averages: 21, 55, & 100: 2.509 , 2.444437 , 2.407

Our forecast called for August to see 2.44 for the second time.

  • With the daily settle above this mark August is signaling continued strength.
  • Demand from refiners will be strong in consideration of the inventory draw down and summer driving demand.
  • August settled atop a down trend line and appears ready to punch through.
  • If this occurs the initial target is 2.475 to 2.48.
  • The key upside pivot is a daily settle above 2.48.
  • This model is intact as long as Aug holds 2.415, which is the minor pivot.
  • The key pivot to the intraday chart is a settle below 2.385.
  • We are a buyer of the dip.

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ethanol 071113

 

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ethanol wkly 070813

DISTILLATE
HEAT S2 S1 CLOSE R1 R2 TREND
DAILY 29380 29660 30017 30275 30725 UP
WEEKLY 27950 28900 29897 30600 31044 PEAK

Daily Moving Averages: 21, 55, & 100: 2.9228 , 2.8981 , 2.9176

Weekly Moving Averages: 21, 55, & 100: 2.8310 , 2.9865 , 2 .9970

Although August participated in the rally it remains the weak link to the complex.

  • This is largely due to seasonal influences as well as refiners pushing the pedal to the metal with increased runs.
  • Hence the reason for the relative weakness.
  • Nevertheless, August will continue to follow crude higher albeit in truncated fashion.
  • The model calling or higher prices is based on the pivot of 2.9660 holding before a new high is seen.
  • We are in a buy the dip mode, but feel there are better opportunities elsewhere in the complex.
  • August is likely to stretch to 3.0250 to 3.03 as an initial objective.
  • With a five minute settle above 3.0350 momentum will increase.
  • That will usher in a rise to 3.07 to 3.0750.

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heat 071113

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HEaT WKLY 070813

NATGAS
NATGAS S2 S1 CLOSE R1 R2 TREND
DAILY 3526 3625 3680 3730 3890 CONGEST
WEEKLY 3050 3470 3617 3905 4375 BOTTOM

Daily Moving Averages: 21, 55, & 100: 3.725 , 3.929 , 3.887

Weekly Moving Averages: 21, 55, & 100: 3.857 , 3.458, 3.241

The outlook for Wednesday cited a negative bias.

  • While this was based on 3.7650 remaining intact, an early morning run to the 3.79 area was seen before regular trading hours.
  • This was likely due to the well leak in the Gulf, but as we stated in last night’s report, it was not a huge producer.
  • Chantal is likely to be a non-event for any production. In fact the storm has not yet organized though some forecasters are naming the storm before hand.
  • The inventory outlook for Thursday is for a build of 82 BCF.
  • We continue to see this pattern with a negative bias. This will be confirmed with a break of the minor pivot at 3.625.
  • August will have initial resistance for a bearish outlook at 3.73 to 3.75. The pivot is 3.79.
  • If the downside pivot at 3.625 is busted August will slide to test the recent contract low at 3.256.
  • We are neutral of this market for Thursday.

 

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nat 071113

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