Stock markets seem to have found their footing – temporarily at least – which has helped to calm down the action in energy futures.  Yesterday saw the DJIA open down 567 points, only to end the day up 567 points, in a bit of symmetry that may well be the difference between a correction and a collapse.

To put the stock volatility in perspective, over the past 2 years the average daily trading range (intraday low to high) was 131 points.  Over the past 2 sessions, the average range was 1,382 points.  While the record setting point swings are certainly worth mentioning, on a percentage basis the recent swings still pale in comparison to what we saw in the midst of the 2008 financial crisis, and even on occasion in the years following.

While cooler heads seem to be prevailing for now, the selling over the past week has pushed most petroleum contracts to the verge of breaking the bull trends that have held up prices for the past 7 months.  The next few days look to be pivotal since the door is open for a big move lower if the bulls can’t recover quickly.

ULSD prices are leading the selling this morning after the API was said to show a build of 4.5 barrels in diesel inventories last week.   The diesel contract has broken its weekly trend-line, and looks to be heading to near term support in the $1.96, so there’s a “buy the dip” argument to be made short term.  If that support fails, the $1.85 range looks to be the next natural stopping point as it marks both the December low, and the 38% retracement of the rally from $1.35 in July to $2.14 in January.

RBOB gasoline futures meanwhile are the only contracts holding onto gains, after the API was said to show a counter-seasonal draw in gasoline stocks.  $1.80 looks to be near term support for the March contract, while the April and forward months (which have the more stringent summer specs) will need to get back above the $2 mark to put the bulls back in control.  The EIA inventory report will be out at 9:30 central.

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