RBOB And Brent Clinging To Small Gains

It’s a mixed bag to start the week for energy futures with RBOB and Brent clinging to small gains while WTI and ULSD are moving modestly lower. Stock market volatility and uncertainty surrounding the sanctions on Iran that officially start Sunday remain the two main headlines that seem to be driving the price action.

RBOB gasoline futures are once again taking their place as the most volatile of the energy contracts, attempting to lead the way higher this morning after leading the way lower over the past few weeks. Today’s relative strength in gasoline could be some bottom fishing by those who think that the spread between gasoline and diesel has gone too far after gasoline crack-spreads hit 3 year lows last week and ULSD spreads reached 3 year highs.

Money managers cut their net-long holdings across the big 4 petroleum contracts last week, as the flight to safety trades seems to be continuing based on the Commitments of Traders (COT) data. WTI and RBOB net length held by the large speculative category of trader dropped to their lowest levels of the year, although so far the liquidation has been relatively orderly compared to sell-offs we’ve witnessed in years past.

Baker Hughes reported a net increase of 2 oil rigs actively drilling in the US last week, bringing the total count to a fresh 3.5 year high.

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