Written by: Bryen Deutsch
Friday’s choppy action was not a surprise as the refined products exhausted themselves on Wednesday and Thursday. After a quiet start to the week, RBOB gasoline shot up 13 cents and up HO 10 cents while Brent Crude popped $4 dollars. Interestingly, June WTI actually closed DOWN for the week as we saw the June Brent/WTI spreads widen to over $8.
Last Friday’s Baker Hughes Rig Count showed active rig counts fell for a 20th straight week. The number of active rigs fell by 31 to 703, the lowest level since October 2010. Technically speaking, Friday’s close in the Brent, HO and RBOB at the highest levels for the year opens the door for more upside this week. All eyes will be focused on Wednesday’s FOMC announcement which will give traders a clue as to the Fed’s timeline for a raise in interest rates. Continued weakness in the dollar will support the current uptrend.
Nat Gas was lackluster the entire week as the market forged to the lowest levels we have seen since June 2012. Warming extended forecasts, dropping rig counts, and non- 2012 inventory levels set the stage for bottom fishing bulls to have a decent chance of a run once summer heat kicks in. The short side at this point seems limited yet bears could keep testing the pockets of weak longs. Large net short speculative positions as revealed in the weekly CFTC COT report will support this market once the funds decide to cover.
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