NYMEX Oil: Crude Down on Technical Weakness, Gasoline Slump
Feb. 15-MAR--
By Melanie Lovatt, BridgeNews
New York--Feb. 15--NY crude oil futures continued to make heavy losses
as Thursday's session wore on, amid technical weakness and a big slump in
gasoline prices. At 1412 ET Mar crude was down 87 cents, 2.9%, at $28.84
per barrel after dropping to a two-week low of $28.60, while Mar gasoline
was down 313 pts, 3.6%, at 84.85c per gallon after a two-week low of
84.30c.
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Brokers said that gasoline was coming off sharply as players who had
bought it against heating oil reversed these positions. "With gasoline
still a lot stronger in price than heating oil, we see gasoline under yet
more pressure and a shake out of more people at these levels," said one
broker. Mar heating oil was down only 91 points or 1.2% at 76.20c. Brokers
noted that the differential between heating oil became too wide,
earmarking gasoline for a selloff. Mar gasoline ran up to a three-month
high of 93.70c per gallon last week, becoming over-extended on the upside.
Also pressuring gasoline was talk that Russian cargoes are headed to
N.Y.
Harbor. This will impact the nearby contracts, said one broker.
"It can be blended to meet winter grade specs, but it can't meet the
summer specs," he explained.
Another broker explained that gasoline inventories had been low in the
runup to the summer season and that talk of more cargoes heading to N.Y.
Harbor is taking "some of the bullishness out of the market."
Heavy Q1 refinery maintenance in the U.S. continues to lure gasoline
imports to the Atlantic Coast, particularly from Europe and the
Mediterranean. A BridgeNews survey late January came up with about 20
million barrels of East Coast-bound gasoline cargo fixtures.
Meanwhile, Mar crude's slip under $30 has left it looking weak, with
one broker warning key support at the $28.60 area (at Thursday's session
low so far) looks in danger of being taken out. Brokers noted that losses
were exacerbated in Thursday's session, as locals "jumped in front of
everyone." They noted that with all the buying last week, which took crude
prices higher, players are looking to liquidate some longs. "The longs are
getting very nervous," said one broker.
"We closed very negative Wednesday and the chart pattern weakness
carried over in today's trading," said Tom Bentz, energy analyst at BNP
Paribas. He noted that the price also came off after Wednesday's Mar
option expiration, with a large portion of in-the-money calls abandoned as
players "felt the price would continue lower."
Also pushing crude lower was the narrowing of the Mar-Apr
backwardation, which slipped to under 10c. The backwardation has been
compressed over the last few weeks and players predict that if the spread
moves flat, or to a contango, it will have a negative impact on overall
prices.
While technical weakness was responsible for much of crude's losses,
talk of economic slowdowns is also weighing on the market.
U.S. Treasury Secretary Paul O'Neill said Thursday that the world
economy is beginning to slow "somewhat" and warned that the globally, the
U.S. should not be relied upon as an engine of global growth (story
.17205). End |
