Morning Futures Roundup

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EU Strong-arming of Greece Lifts Crude

Fundamentals

Crude Oil futures are modestly higher this morning, as the EU is putting pressure on Greece to accept the most recent bailout package. The package is expected to keep the embattled nation solvent, at least temporarily. Enthusiasm over the aid package has been tempered by the fact that it does not offer long-term solutions, and also because of the build in US Crude Oil inventory levels. Despite the build in petroleum, the weather outlook for the US this winter is expected to bring severe chills. This could stoke the demand for Heating Oil in the Northeast. The large drawdown in distillates could result in a continuation of the trend in the RBOB/Heating Oil spread. Heating Oil recently hit a premium of 45 cents over RBOB. Resistance in this spread is at 50 cents, which if broken, could result in the spread moving to a dollar or more, as was the case in late 2008. This could also result in gains in Crude Oil prices, as refiners would likely have to work down inventories to produce enough distillates to keep up with demand.


Technical Notes

Turning to the chart, we see the December Crude Oil contract continuing to trade sideways between the 90 and 95 levels. This break is not surprising, given the surge in Oil prices in recent weeks, which resulted in the market being a bit overheated. Since the market rallied into the consolidation, there is a bias toward an upside breakout. The upward crossover of the 20 and 50-day moving averages could be seen as a positive for the market near-term.  Click image to enlarge





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