Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
CRUDE OIL MARKET FUNDAMENTALS: While crude oil has traded a bit softer overnight, so far there hasn’t been too much conviction behind the selling as the price action remains choppy ahead of today’s critical employment report. Indications that the CFTC next week will propose limits on futures positions in energy may be undermining sentiment a bit. Crude oil has become technically overbought on the steep rally from the December lows and the market still looks to be under the profit taking influence inspired by yesterday’s news that China raised rates leaving the global oil demand outlook a bit uncertain. China has been a major consumer of oil last year leading the global recovery and there are now some concerns that tightening liquidity could dent oil demand growth. But fears over China’s oil demand should be tempered on news that Chinese refineries will be running at a record operating rate partly due to expectation of rising gasoline demand since auto sales are expected to remain robust this year. Frigid temperatures blanketing a good portion of the US have also supported the rally in oil over the last month on expectations of rising winter heating fuel demand. But with temperatures expected to moderate next week, that outlook has also given traders a reason to book profits. But the majority of gains in the oil markets from the December low have been based on signs that macro economic conditions are improving which is raising optimism for a strong recovery in oil demand. Most of the economic news over the last month has come in better than expected which has revived bullish sentiment and is attracting an influx of fund money back into the oil markets. Therefore, today’s employment report has the potential to be a big market mover. Given the improvements in a variety of economic data last month and since jobless claims have declined considerably, some traders seem to be expecting a small rise in payrolls which would be the first gain in about two years. While the bull camp has the oil market’s overbought status working against it, we don’t think it will be enough of a limitation to prevent a strong upward move in crude oil on good economic news, especially if the employment data reveals a positive surprise. However, since the oil market is overbought, there is also a good chance that disappointing payroll news could inspire more extensive profit taking. After the initial reaction to the jobs report, outside market influences could also add to oil market volatility. Today’s economic news has the potential to push crude oil in either direction, and traders may get a chance to buy March crude oil closer to $80 per barrel price. But we also suspect a price brake in crude oil off of a disappointing jobs report will end up being short lived given the firm bullish undertone the market seems to possess.
PRODUCT MARKET FUNDAMENTALS: GASOLINE: February gasoline has been waffling around unchanged levels in the early overnight trade as the market appears to be in a holding pattern ahead of today’s critical employment news. But it’s been impressive that gasoline has only seen a limited pull back from this week’s highs despite a large jump in EIA fuel stocks and the market reaching a technically overbought extreme up at these price levels. However, there seems to be concern surfacing that the low refinery operating rate which dropped below 80% last week along with scheduled and unscheduled maintenance could create a tight supply situation in gasoline this spring, especially if economic conditions continue to show signs of improvement. Therefore, today’s employment report could be a major catalyst for this market and a bullish outcome may have the potential to eventually lift gasoline back towards the $2.20 price level. But on the other hand, gasoline appears to be sufficiently overbought that a bearish jobs report reading could also temporarily pressure the market back below $2.10. We still see upside potential for gasoline and given the market’s technical condition and the possibility of volatile trade action off today’s economic news, there is also a chance traders will be able to buy the market at lower levels.
HEATING OIL: February heating oil has edged lower in the early overnight action as traders brace for today’s key employment report and on some pressure tied to a less supportive weather outlook. Heating oil has seen a steep rally from the December low as cold temperatures over the last month and frigid conditions this week have boosted winter fuel demand helping to trim the supply glut in distillate stocks. But with technical indicators at an overbought extreme and most weather forecasters predicting temperatures to warm up a bit next week certainly leaves heating oil vulnerable to more extensive profit taking, especially since fund have likely built a record net long position in this market. Therefore, unless today’s critical read on employment can reveal a bullish surprise, we suspect February heating oilcould give back a sizable portion of this week’s gains.
TODAY’S ENERGY MARKET GUIDANCE: Today’s employment report will likely set the early tone. Traders should be prepared for a possible surge in volatility if the payroll number is surprising since a bigger than expected gain or loss could result in sharp price move.
Energy Market Commentary – 2010.01.08
by Dave Hightower on January 8, 2010
Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
CRUDE OIL MARKET FUNDAMENTALS: While crude oil has traded a bit softer overnight, so far there hasn’t been too much conviction behind the selling as the price action remains choppy ahead of today’s critical employment report. Indications that the CFTC next week will propose limits on futures positions in energy may be undermining sentiment a bit. Crude oil has become technically overbought on the steep rally from the December lows and the market still looks to be under the profit taking influence inspired by yesterday’s news that China raised rates leaving the global oil demand outlook a bit uncertain. China has been a major consumer of oil last year leading the global recovery and there are now some concerns that tightening liquidity could dent oil demand growth. But fears over China’s oil demand should be tempered on news that Chinese refineries will be running at a record operating rate partly due to expectation of rising gasoline demand since auto sales are expected to remain robust this year. Frigid temperatures blanketing a good portion of the US have also supported the rally in oil over the last month on expectations of rising winter heating fuel demand. But with temperatures expected to moderate next week, that outlook has also given traders a reason to book profits. But the majority of gains in the oil markets from the December low have been based on signs that macro economic conditions are improving which is raising optimism for a strong recovery in oil demand. Most of the economic news over the last month has come in better than expected which has revived bullish sentiment and is attracting an influx of fund money back into the oil markets. Therefore, today’s employment report has the potential to be a big market mover. Given the improvements in a variety of economic data last month and since jobless claims have declined considerably, some traders seem to be expecting a small rise in payrolls which would be the first gain in about two years. While the bull camp has the oil market’s overbought status working against it, we don’t think it will be enough of a limitation to prevent a strong upward move in crude oil on good economic news, especially if the employment data reveals a positive surprise. However, since the oil market is overbought, there is also a good chance that disappointing payroll news could inspire more extensive profit taking. After the initial reaction to the jobs report, outside market influences could also add to oil market volatility. Today’s economic news has the potential to push crude oil in either direction, and traders may get a chance to buy March crude oil closer to $80 per barrel price. But we also suspect a price brake in crude oil off of a disappointing jobs report will end up being short lived given the firm bullish undertone the market seems to possess.
PRODUCT MARKET FUNDAMENTALS: GASOLINE: February gasoline has been waffling around unchanged levels in the early overnight trade as the market appears to be in a holding pattern ahead of today’s critical employment news. But it’s been impressive that gasoline has only seen a limited pull back from this week’s highs despite a large jump in EIA fuel stocks and the market reaching a technically overbought extreme up at these price levels. However, there seems to be concern surfacing that the low refinery operating rate which dropped below 80% last week along with scheduled and unscheduled maintenance could create a tight supply situation in gasoline this spring, especially if economic conditions continue to show signs of improvement. Therefore, today’s employment report could be a major catalyst for this market and a bullish outcome may have the potential to eventually lift gasoline back towards the $2.20 price level. But on the other hand, gasoline appears to be sufficiently overbought that a bearish jobs report reading could also temporarily pressure the market back below $2.10. We still see upside potential for gasoline and given the market’s technical condition and the possibility of volatile trade action off today’s economic news, there is also a chance traders will be able to buy the market at lower levels.
HEATING OIL: February heating oil has edged lower in the early overnight action as traders brace for today’s key employment report and on some pressure tied to a less supportive weather outlook. Heating oil has seen a steep rally from the December low as cold temperatures over the last month and frigid conditions this week have boosted winter fuel demand helping to trim the supply glut in distillate stocks. But with technical indicators at an overbought extreme and most weather forecasters predicting temperatures to warm up a bit next week certainly leaves heating oil vulnerable to more extensive profit taking, especially since fund have likely built a record net long position in this market. Therefore, unless today’s critical read on employment can reveal a bullish surprise, we suspect February heating oilcould give back a sizable portion of this week’s gains.
TODAY’S ENERGY MARKET GUIDANCE: Today’s employment report will likely set the early tone. Traders should be prepared for a possible surge in volatility if the payroll number is surprising since a bigger than expected gain or loss could result in sharp price move.
Tags: Crude Oil, Energy, Gasoline, Heating Oil, RBOB
About Dave Hightower