So Much For Cheap Gas
Today’s Spotlight Market
While a refinery strike would be a bullish factor towards both Gasoline and Diesel, one would have to believe that this would be a generally bearish influence on Crude Oil prices, as lower refining demand could in the short-term greatly increase the supply glut of Crude in the U.S. However, it appears that traders are turning their focus towards the lower rig counts, with the latest report by oil field services company Baker Hughes showing U.S. oil rig counts have fallen to their lowest levels in 3 years. The upshot being that the current low prices seen in crude may have finally done the trick to force U.S. producers to curtail drilling in an attempt to help alleviate the current oil surplus seen here in the U.S.? ?
Fundamentals
While most of the U.S. received a belated holiday gift of sub-two dollars per gallon Gasoline to start the year, it seems like this ?gift? for motorists was too good to last as prices rallied sharply to 4-week highs, as worker strikes at several major U.S. refineries has triggered concerns on refining capacity. February usually sees a rise in gasoline prices as refineries tend to perform maintenance during this time frame ahead of the summer driving season. In addition, the sharp drop in Gasoline prices has triggered increased demand with usage of averaging over 9 million barrels per day. To put this into perspective, we do not normally see gasoline demand rise above 9 million barrels per day until April, when spring break vacations begin. While U.S. Gasoline inventories remain ample, we should note that middle distillate inventories are tight and if increased motorist demand for fuel runs into prolonged refinery strikes, we may see the market begin to price in a ?risk premium? for both RBOB Gasoline and Diesel prices as we move into spring.????? ?
Technical Notes? -? View Today’s Chart
Looking at the daily continuation chart for RBOB Gasoline futures, we notice the chart gap generated by the sharp price rise following the expiration of the February RBOB futures. Prices are now trading well-above above the 20-day moving average (MA) for the first time since June of 2014, as prices appear to be attempting to form a major bottom. The 14-day RSI have rebounded sharply from well-oversold levels to a relatively strong reading of 62.41. 1.6250 is the next significant resistance level for the March contract, with support seen at the 20-day MA currently near the 1.3565 price level.
———————————————————————————————-
This article is provided for informational purposes only. No statement in this article should be construed as a recommendation to buy or sell a security or to provide investment advice. The content provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy and completeness. optionsXpress makes every effort to provide timely information to its recipients but cannot guarantee specific delivery times due to factors beyond our control. Derivatives involve substantial risk and are not appropriate for all investors. Please read the?“Disclosure Statement for Futures and Options”?prior to investing in futures or options. For investments using a straddle or strangle options strategy the potential loss is unlimited. Multi-leg option strategies are subject to multiple commissions. Profits may be eroded by the commission expended to open and close the positions and?other risks?apply.