RBOB Heating-Up Ahead Of Driving Season
???? Today’s Spotlight Market
Gasoline futures have halted the slide that began in mid-February, as some traders’ have become emboldened by the immanent start to the driving season. Inventory levels of Crude Oil remain at multi-decade highs, but there is far more optimism in the US economy than a few weeks ago.
The upbeat assessment of the economy and potential fuel demand could be premature, so longs could be cautious and easily rattled. Technically, the chart shows confirmation of a double-bottom reversal pattern, but prices have stalled since confirmation. Ideally, some traders would like to see more follow-through here as further confirmation.
???? Fundamentals
RBOB Gasoline futures seemed to have found stability above the 2.700 level ahead of Memorial Day, which is considered the start of driving season. Some traders have become more optimistic that the US is separating from the pack and on track to have moderate economic growth this year.
Yesterday’s EIA report showed Cushing, OK stocks falling 652,000 barrels, but rising 230,000 barrels,overall in the US. The drawdown in Gasoline inventories was 900,000 barrels, which is more than the analyst estimate of 500,000 barrels. The inventory data gave RBOB bulls a shot in the arm and caused the WTI/Brent Crude Oil spread to momentarily trade down to 7.77.
The enthusiasm could be short -lived, though, after traders dive deeper into the numbers. Crude Oil production is rising once again, and Gasoline inventories averaged 8.5 million barrels a day over the past month. While the Gasoline inventory stocks are down 2.4% versus last year, there are more than adequate supplies, barring an unforeseen spike in demand. Refinery runs were 87% of capacity, up over the prior week. Refining capacity should continue to increase, as seasonal maintenance work is basically completed.
???? Technical Notes
Turning to the chart, we see the June RBOB contract confirming a double-bottom formation. The measure of the pattern suggests prices could test the mid to high-2.90’s. There is scattered congestion on the chart around the 2.9000-2.9250 area, which could act as resistance. The recent closes above the 20-day moving average suggest that a near-term low may be in place.
The momentum indicator is just below the zero line. Crossing into the positive could be seen as bullish. The RSI indicator is currently in neutral territory, but threatening to push into oversold levels, which can be seen as neutral to bearish.
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