Gasoline and diesel futures are trading higher for a 6th straight session, but signs of uncertainty in this rally are beginning to appear.  WTI and Brent crude finished lower yesterday, and all of the big 4 contracts have been unable to break through chart resistance that would allow another 5-10% of upside.  If this temporary ceiling continues to hold, the question will be whether we’re in for another period of sideways trading, or if a new test of the year’s lows is in store.  With the official vote from OPEC and friends on the proposed 9-month extension of supply cuts just a week away, my money would be on sideways trading near term.

There was a bit of selling overnight after the API report yesterday afternoon.  It’s said the industry group reported a build in crude oil stocks of .88 million barrels, while gasoline inventories dipped by 1.78 million and diesel stocks grew by 1.78 million.  Many forecasts were guessing that crude oil stocks would draw again this week, so it seems the build was enough to put a little bit of fear into the buyers, but it didn’t last long as prices have recovered this morning.  The DOE report is due out at 9:30am central.

Reports yesterday that an upcoming pipeline shutdown in Eastern Pennsylvania may cause some Philadelphia refiners to cut runs this summer seemed to underpin gasoline prices early on, but those gains failed to hold as subsequent reports suggested alternate options would be available.   Those refiners can’t seem to stay out of the news lately, whether it be the hotly contested reversal of the Laurel pipeline, or the debate over the renewable fuel standard, Philadelphia seems to be ground zero for refinery stories.

Speaking of the RFS, ethanol RINs are continuing their advance this week, breaking back above the 50 cent mark yesterday for the first time in nearly a month and are bid at 52 cents this morning.  There has been little news from Washington lately, so this latest rebound seems to be driven by refiners covering their obligations rather than a reaction to a potential change in the law.

Equity markets around the world are looking a bit shaky this morning, with markets in Asia and Europe trading lower and US futures following them into the red.  While US indices reached record highs earlier in the week, the S&P 500 volatility index, AKA the VIX, reached its lowest level.  It’s hard to say if this lack of fear means equity markets can continue with this slow and steady march higher, or if this simply the calm before the storm.  If it’s the latter, expect energy prices to be impacted if equity volatility returns, as correlations seem to be strongest when fear is driving the price action.

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