The big three energy futures are a modest mixed bag this morning after a rally on Friday that pushed RBOB to a gain for the week and made up most of the diesel contract’s losses. The shuttering of five US oil rigs, following the previous week’s closure of two, doesn’t seem to be driving much price action with the benchmark up only 14 cents to start the week. New York gasoline and diesel are taking a small step back and are down 25 and 50 points respectively.
The proverbial “smart” money backed off on their net WTI positions last week and in turn opted for the European crude contract instead. The Brent-WTI spread is hanging around the $5.50 range and will likely continue to drive American exports, of which we saw an increase of 500mb per day last week.
The conflict in Kurdistan resulted in the slowing of a pipeline carrying crude from Kurdistan through Turkey to ports in the Black Sea. While this would be a fundamental disruption, especially to export economics, it looks like Iraq is considering reopening a different pipe to Turkey, essentially cutting Kurdistan out. It’s unclear whether resolution or disruption are currently priced in; it’s likely a little of both.
Last week’s move established some technical buying support for prompt month HO contract at its 10 and 20-day moving averages. The benchmark sold down and settled below the averages on Thursday only to be brought back above them in Friday’s rally. The prompt month’s interaction with these support levels will likely dictate any downward movement this week. Any significant upside potential will be decided around the $1.86 level with little in the way before then. RBOB’s similar break above the 50-day MA last week put in some support at $1.65 and the contract will likely trade between that and last month’s highs around the upper $1.70s.