Oil Prices Moving Higher
Oil prices are moving higher for a 7th straight trading session, aided by reports of additional production cuts from Saudi Arabia, and the return of optimism to global equity markets as trade talks progress between the US and China.
While the recovery rally in both energy and equity prices since the Christmas-Eve meltdown is noteworthy, energy futures are still struggling to break back above the old support of its November lows that has turned into chart resistance in the new year.
Reports Monday morning that Exxon was restarting units at its Beaumont TX refinery shut following a fire over the weekend seemed to put an end to the early rally in refined products. The reversal marked the 3rd out of 4 trading sessions in 2019 that RBOB gasoline futures wiped out early gains of nearly 5 cents.
Several short term technical indicators continue to point higher for oil and refined product futures, but if they can’t break and hold above those November lows (round numbers, $50 for WTI, $59 for Brent, $1.81 for ULSD and $1.40 for RBOB) it seems like this rally may turn into nothing more than an opportunity for sellers. That said, if that resistance is broken, there’s plenty of room on the charts for prices to run higher.
Winter doldrums: Diesel prices in the Chicago market have dropped to a discount of more than 30 cents below ULSD futures, as the Midwest slogs through the weakest demand period of the year, making prices in the windy city some 20 cents cheaper than any other major spot market in the US. With Canadian oil prices surging after Alberta forced production cuts to boost prices that dropped to $13/barrel this fall, the heavy discounts for refined products creates a brutal combination for PADD 2 refinery margins.