Recap: Oil markets retreated on Friday, with NYMEX ULSD (HO) dropping the most, 7.85 cents to 3.0992. A significant part of the drop was in the March contract (set to expire this Friday) where 3.40 cents of the March-April backwardation dropped down to 6.03 cents upon the close (see orange box to right after clicking this link.) We could be seeing some profit taking ahead of this week's expiration, particularly after the significant 10 cent move up from the previous week, and the seasonal switch from winter grade to summer grade diesel on the Colonial pipeline in mid-March on Cycle 15. In any event, it was a nice dip and opportunity for retailers and end-users for this upcoming colder than normal forecast for the Northeast (see the HDD forecast below.) NYMEX RBOB (Gasoline) also expires this Friday and closed down 1.33 cents to 2.8333. NYMEX Crude moved lower 55 cents, but maintained its position of closing above $102 for 5 straight sessions to 102.20. ICE Brent moved lower 45 cents to 109.85, leaving the Brent-WTI spread at one its lowest points since October 2013, to $7.65. Currently, NYMEX ULSD is up 1.78 cents to 3.1140, RBOB is down 51 points to 2.8282, NYMEX Crude is up 23 cents to 102.43 and ICE Brent is down 15 cents to 109.70. Markets will look to the EIA's weekly DOE Inventory Report to be released at the regular time this Wednesday at 10:30am for more direction.
Technically Speaking: Price, Volume and Open Interest: In the absence of fundamental news (not that we are lacking any here, ie. cold temperatures), technical analysis can provide some additional insights. Interestingly, if we look at the price, volume and open interest, we may get some leading information about price action and an impending market trend change. First, from Tradingcharts.com, "volume represents the total amount of trading activity or contracts that have changed hands in a given commodity for a single trading day, " and open interest "is the total number of outstanding contracts that are held by market participants at the end of each day. Where volume measures the pressure or intensity behind a price trend, open interest measures the flow of money into the futures market." Tradingcharts.com shows the relationship in their chart that can be seen by clicking here.
For example, on the March NYMEX ULSD contract, since last Wednesday, February 19th, both volume and open interest have been dropping from volume of 57,768 and open interest of 55432 on Feb 19th down on Friday, February 21st to, respectively, 38,891 volume and 38,005 open interest. This volume and open interest reduction for the end of last week on the March NYMEX ULSD contract might indicate part of the reversal in the price action on Friday. Again, as we try and make "sense" of many trading factors that are out of our control, this information can help guide the best possible decision at a specific point in time for end users trying to manage their supply needs. And a case in point was a dip in the oil markets that provided a short term buying opportunity for many heating oil retailers last Friday, as winter is still not over!
Heating Degree Day (HDD) Forecast: Fax-Alert Weather Service has forecasted heating degree day (HDD) % of normal in its Ten Day Temperature Guidance report for the period February 21st-March 2nd for the following Northeast locations. (HDD percentages above 100% indicate percentage increase of HDDs above colder than normal temperatures.)
New York: NYC 107%, Binghamton 112%, Albany 109%, Newburgh 108%
New Jersey: Newark 106%, Trenton 103%
Pennsylvania: Philly 108%
Massachusetts: Boston 107%, Worcester 109%, Chicopee 120%, Hyannis 103%
Connecticut: Hartford 106%, Bridgeport 110%, New Haven 108%
NH: Manchester 106%, Portsmouth 110%, Lebanon 107%, Concord, 110%
Maine: Portland 110%, Augusta 106%, Bangor 110%
Vermont: Burlington 112%, Rutland 108% Rhode Island:
Providence 104% Click here to view today's Refined Products MarketWatch