Energy prices are continuing to tread water this week after Tuesday’s attempted sell-off failed to hold, and the API gave a mixed reading on inventory levels yesterday afternoon.
After the bullish trend-lines that held prices up over the past month broke down earlier in the week, the stage was set for a sharp sell-off across the board yesterday. The fact that they were unable to sustain the early losses suggests low conviction on the part of sellers and hints that we could be due for another period of sideways trading rather than a serious reversal of the spring rally. Bears will surely point to the fact that gasoline prices are pointing down for a 6th straight session, while the bulls will note that the grand total of those 6 sessions is only a nickel of losses – something we wouldn’t be surprised by in a single day in previous years.
Technical indicators are mixed for crude and products, suggesting more choppy trade ahead, while seasonal factors will soon start favoring more selling.
The API’s weekly report was said to show crude stocks down 840k barrels, distillates down 1.8 million while gasoline stocks had a counter-seasonal build of 1.3 million. The overnight reaction to the report was on par with those readings with both WTI and ULSD trading either side of unchanged, while gasoline prices are down a little less than a penny. The DOE’s weekly inventory report is due out at 9:30am.
As the charts below show, while prices have had a nice recovery in the past month, and a modest pull-back in the past week, the shape of the forward curves has not changed much during this time. The stability in the curve may suggest that the market is in an uneasy state of equilibrium as the OPEC vs Shale debate is likely to take months, if not years, to be sorted out.