Morning Futures Roundup

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Are Gasoline Futures Signaling Better News for Drivers This Summer?

   Fundamentals
The talk of potentially record high Gasoline prices this summer has caused a media buzz, with some talk that we could see retail prices reach $5 per gallon. However, if one were to look at the RBOB Gasoline futures market, the picture looks a lot less dire for motorists. Summer month Gasoline futures are trading about 20-cents below their recent highs, as it appears that many traders are beginning to focus on U.S. Gasoline demand which has been rather weak lately.

In addition, U.S. Gasoline inventories are running just over 2.5 million gallons above the 5-year average, despite nine consecutive weeks of lower inventories as reported by the Energy Information Administration (EIA). It has been lower imports and lower refinery runs that have kept Gasoline supplies from becoming rather burdensome so far this year.

High Oil prices, particularly for Brent Crude, have been the main driver behind keeping Gasoline futures above $3 per gallon, as the "risks premiums" in Oil futures prices, which appear to have been running anywhere from 10 to 15 dollars per barrel due to nervousness over a potential embargo of Iranian Crude. With Oil prices among the biggest factor in the cost of Gasoline, high Crude prices overwhelmed otherwise rather negative supply and demand fundamentals for Gasoline.

Speculators have been holding a near-record long position in RBOB futures, with the most recent Commitment of Traders report showing a combined non-commercial and non-reportable net long position of just over 103,000 contracts as of April 10th, after reaching a record 111,094 net-long position one week earlier. Should RBOB prices fail to halt the recent downtrend soon, we may start to see long liquidation selling emerge.

   Technical Notes
Looking at the daily chart for June RBOB, we notice what appears to be a rounded-top formation, with its center at the contract high of 3.3689. Prices are starting to pull away from the 20-day moving average, and the 14-day RSI has turned weak, with a current reading of 34.73. The next major support point for the June contract is not seen until the 200-day moving average, currently near the 2.9150 area. Near-term resistance is found at the 20-day moving average, currently near the 3.2550 price level.

  
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