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CRUDE OIL MARKET FUNDAMENTALS: Crude oil begins the trade today in negative ground in response to an unexpected decline in Chinese economic data, a looming Euro Zone refunding deadline and weak global equity markets. In the face of ample supplies, Crude oil has paid more attention to demand factors for direction since the May lows and that puts the market in a negative position today. The downward revision in China’s Consumer Confidence readings suggests the rate of growth in the region is moderating, and that is seen as a negative for energy demand. Risk aversion has also ratcheted higher ahead of a July 1st deadline for a Euro zone 442-billion euro refinancing operation, which has in turn created liquidity concerns again. While a top global bank mid-year report forecasted crude oil prices to reach $100 in 2011, barring a surge in US dollar, that forecast is simply lost in the negative macro economic headline shuffle. Tropical storm Alex’s track away from key Gulf of Mexico energy operations has also trimmed some risk premium built into crude, while providing more challenges for BP. While two of Mexico’s major terminals have shut down in anticipation of the storm turning to hurricane status, the trade is mostly uninterested in minor supply side snafus. While trading volumes in Crude oil have come in well below average, as prices broke down from the $80 resistance level that positive technical signal needs to be discounted until demand views begin to improve again. The weak economic backdrop, strong dollar action and another move away from risk taking markets, sets August crude oil up for another test of the sub $75.00 support zone.
GASOLINE: A series of negative economic influences seem to be saddling risk attitudes again and that has helped push August RBOB down toward last week’s lows. A downward revision to Chinese Consumer Confidence raises concerns over moderating growth in that region, while liquidity issues have once again taken center stage in the EU ahead of a Euro bank refunding deadline. With the Baltic Freight index also showing a long pattern of weakness recently there doesn’t appear to be much hope that global gasoline demand will be strong enough to tighten current abundant gasoline supply levels. August RBOB opened weak and appears to be poised to at least test the mid June lows of $2.0526.
HEATING OIL: The heating oil market has fallen sharply overnight under the weight of new found demand concerns and a historically high supply function. As suggested a number of times recently, heating oil easily has the worst classic fundamental supply and demand setup and therefore it can’t tolerate a broad based macro economic let down. Near term downside targeting is seen initially at $2.0550 but a return to the even number $2.00 level can’t be ruled out if broad based views of a double dip recession become common place.
TODAY’S ENERGY MARKET GUIDANCE: Long liquidation and fresh macro economic selling looks to put energy prices down hard today.
Energy Market Commentary – 2010.06.30
by Dave Hightower on June 29, 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: Crude oil begins the trade today in negative ground in response to an unexpected decline in Chinese economic data, a looming Euro Zone refunding deadline and weak global equity markets. In the face of ample supplies, Crude oil has paid more attention to demand factors for direction since the May lows and that puts the market in a negative position today. The downward revision in China’s Consumer Confidence readings suggests the rate of growth in the region is moderating, and that is seen as a negative for energy demand. Risk aversion has also ratcheted higher ahead of a July 1st deadline for a Euro zone 442-billion euro refinancing operation, which has in turn created liquidity concerns again. While a top global bank mid-year report forecasted crude oil prices to reach $100 in 2011, barring a surge in US dollar, that forecast is simply lost in the negative macro economic headline shuffle. Tropical storm Alex’s track away from key Gulf of Mexico energy operations has also trimmed some risk premium built into crude, while providing more challenges for BP. While two of Mexico’s major terminals have shut down in anticipation of the storm turning to hurricane status, the trade is mostly uninterested in minor supply side snafus. While trading volumes in Crude oil have come in well below average, as prices broke down from the $80 resistance level that positive technical signal needs to be discounted until demand views begin to improve again. The weak economic backdrop, strong dollar action and another move away from risk taking markets, sets August crude oil up for another test of the sub $75.00 support zone.
GASOLINE: A series of negative economic influences seem to be saddling risk attitudes again and that has helped push August RBOB down toward last week’s lows. A downward revision to Chinese Consumer Confidence raises concerns over moderating growth in that region, while liquidity issues have once again taken center stage in the EU ahead of a Euro bank refunding deadline. With the Baltic Freight index also showing a long pattern of weakness recently there doesn’t appear to be much hope that global gasoline demand will be strong enough to tighten current abundant gasoline supply levels. August RBOB opened weak and appears to be poised to at least test the mid June lows of $2.0526.
HEATING OIL: The heating oil market has fallen sharply overnight under the weight of new found demand concerns and a historically high supply function. As suggested a number of times recently, heating oil easily has the worst classic fundamental supply and demand setup and therefore it can’t tolerate a broad based macro economic let down. Near term downside targeting is seen initially at $2.0550 but a return to the even number $2.00 level can’t be ruled out if broad based views of a double dip recession become common place.
TODAY’S ENERGY MARKET GUIDANCE: Long liquidation and fresh macro economic selling looks to put energy prices down hard today.
Tags: Crude Oil, Energy, Gasoline, Heating Oil
About Dave Hightower