Energy Price Outlook The oil market is expected to eventually make a move above the top end of the past week’s consolidation pattern in a more decisive manner than yesterday’s intraday “breakout.” We think that fund selling which has been prevalent in the last few weeks could diminish as many hedge funds closed their books throughout late-Oct. Support may also come from the restart of Northeast refineries, technical factors,
The oil market appears to be locked in a sideways continuation pattern, however, the timing of a potential breakout may still hinge upon the trading floors opening for normal operations. The CME said late yesterday that Nymex floor trading would resume only when the city lifts its evacuation order for Zone A.
Today’s session will likely be muted again by the closure of trading pits in New York, but we expect moderate pressure to remain in place. The market may be setting up for weakness through tomorrow, when many hedge funds are expected to close their books for the year.
The overnight markets have continued where yesterday left off with gains being posted in nearly every market. The grain market seem to be gaining some interest again as the equity markets have lost nearly 4% in the past week, this lowers the overall bench market of returns for the year and gives some more runway to trade and place risk back on knowing that the equity benchmark is now up 11% rather than 15%.
This week’s trade in the oil market may witness bottoming action take place, as the U.S. election begins to move to center stage. There may also be an exit from the markets by hedge funds that close their books on Oct 31st, but the impact they actually exert may be somewhat limited in the near-term as their long positioning has already been reduced.
The oil market stabilized its short-term selloff yesterday and rebounded slightly, but evidence is unclear as to whether a bottom has been formed. The action was not typical of a bottom, as volumes appeared to be light and fresh economic data was mixed.
The oil market may continue its short-term correction in the near-term, but it’s also entering a support range between
$81.00 and $85.00/bbl. We think that the rate of decline will slow in the near-term, as some of the impulsive selling and weak longs exited the market during Monday’s session.
Not sure if it’s the fact that Obama won the debate last night or the fact that earnings continue to fall below expectations but it appears that the market is quickly moving back to a risk off environment moving back to capital preservation mode.
Natural Gas traded higher settling $3.535 up $0.083 2.6%. The curve was firmer, 13/16 $0.02 better. Hub cash was stronger, ~$0.12 back this morning, Z-6 down $0.10 to $3.50. The 12z was in line w/ overnight models, showing mostly cooler temps Eastern U.S. during the 6-10 day (Northern Plains came in slightly warmer).
Oil prices may continue their short-term correction over the next few days, with support in WTI offered between $81.00 and $85.00/bbl. We think that the rate of decline will slow in the near-term, as some of the impulsive selling and weak longs have exited the market. A focus will be on the FOMC announcement today, but little change in policy is expected after the last meeting’s implementation of QE3.
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