Morning Futures Roundup
Crude Products Fail To Hold Gains From Sandy
Seasonal declines in Gasoline prices were postponed temporarily,as East Coast refineries shut down production due to Hurricane Sandy. Nearly 7% of U.S. refining capacity is located in the area that faced Sandy's wrath and where inventories of refined products are less than ample.
Gasoline inventories on the East coast are currently 9% below year ago levels, and distillates are a whopping 32% below last year's totals. In addition, New York Harbor is the delivery point for NYMEX Crude Products, which adds to the bullish bias for front month futures should issues arise for deliveries.
RBOB futures are now in a backwardation going out to January of 2013, and Heating Oil out to the April 2013 contract. However, Crude Oil prices are weak, as any loss of refining capacity will hurt Crude demand in the short-term. In addition, the loss of economic activity due to businesses closings because of the storm may lessen the demand for fuel -- especially diesel, which should help offset any temporary refinery outages.
Large speculators have been shedding their net-long positions in both Gasoline and Heating Oil, with the most recent Commitment of Traders report showing a decrease of a combined 14,845 contracts for the week ending October 23rd. The next price move for the refined products might be determined by how quickly refinery production can be resumed on the East Coast and what effects the rebuilding effort has on fuel demand.
Looking at the daily chart for December Heating Oil, we notice what appears to be a double-top formation, as recent highs made on October 11th failed to take-out the previous highs made back in September. Prices are holding just above the 200-day moving average ("MA"), but failed to move above the 20-day MA on Monday's rally.
The 14-day RSI is neutral to weak, with a current reading of 44.34. Support remains at 3.000, and should prices fail to hold this key psychological level, the next support area is not seen until the 2.9250 to 2.8500 price range. Resistance remains at the 20-day MA, currently near the 3.1258 area.
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