Oil Market Dithers as Funds Buy

By Brad Zigler

The U.S. Energy Department usually releases its weekly petroleum inventory report on Wednesday, but since it's Veterans Day, we won't see those numbers ‘til tomorrow.

Nonetheless, we can take a quick turn around the petroleum sector to see how traders and refiners have lined themselves up ahead of the report's release.

Since the last Energy Department report, crude oil has remained stalled at the $80-per-barrel level. Tuesday's half-percent loss in the NYMEX day session brought the front-month contract down 55 cents, or 0.7 percent, for the week. Product prices also eased this week, as gasoline and heating oil both lost 2 cents a gallon, or 1 percent.

The larger decline in product prices compressed refining margins and reduced the yield on crack spreads between 29 and 30 cents per barrel. Margins on wintertime cracks favoring heating oil averaged 8.6 percent, while gasoline-heavy cracks yielded 7.8 percent this week.

NYMEX Product Cracks

The premium for lighter, sweeter West Texas Intermediate crude over North Sea Brent crude pulled back to $1.99 per barrel. Last week, traders paid $2.70 more for the U.S. benchmark grade.

Contango continues to prevail in the crude market. This week, the three-month NYMEX roll widened to $1.92 per barrel from $1.77. Net oil storage costs are now running at a 2.2 percent annualized rate.

Money Managers Positions In Oil Futures

Speculative funds have become aggressive buyers of oil futures recently. New purchases and short covering are accelerating money managers' net long position toward a five-year high. Noninstitutional traders hold more modest net long positions.

MACD, RSI and stochastics on the December crude chart all point downward, though prices remain above near-term moving averages. An upside breakout would be signaled by a close above the October high of $82, but resistance at $81.06 will have to be overcome first.

A break below $76.55 is likely to attract fresh selling.

Comments

[Jack Walker:]

Brad,

Can you provide some more details of the Money Managers Index?

What's included?

Thanks,

Jack

Nov 12 11:22 AM

[Brad Zigler:]

Jack -

The index represents the cumulative net long position (futures and options by delta) held by money managers reporting to the CFTC. The index is normalized at 100 as of June 13, 2006.


On Nov 12 11:22 AM Jack Walker wrote:

> Brad,
>
> Can you provide some more details of the Money Managers Index? <br/>
>
> What's included?
>
> Thanks,
>
> Jack

Nov 12 03:25 PM