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Gasoline Futures Continue Their Slide Lower To Start Wednesday’s Trading Session

Wednesday, Jun 15 2022
Market Talk

Gasoline futures continue their slide lower to start Wednesday’s trading session, falling 40 cents from Friday’s highs, and getting closer to bringing some technical support levels into play that could make this pullback more than just a routine correction. 

Given the incredibly steep slope of the gasoline rally (from $1.87 to $4.32 in 6 months) there could be a 20 cent or more difference in where the bullish trend line falls today depending on how broad of a brush you choose to use. A range between $3.70 and $3.90 and s looks like it might be the next stopping point if this pullback continues, with a drop back to $3 possible if that range doesn’t hold. If you’re looking for a more precise number to watch for an early warning sign that the top could be in for the year, peg $3.89, which marked the high in March before prices dropped $1/gallon. That former resistance could become new support, or it could be nothing more than a speed bump in a market that’s been smashing records left and right this year.

While gasoline prices are suddenly looking fragile technically, diesel futures are holding strong, and could be poised for another strong rally near term if they can take out the June high of $4.51. Longer term, the diesel chart continues to look like it could be forming a head and shoulders top that could ultimately see prices drop back below the $3 mark later this year IF prices stall out in the next few weeks. Natural gas continues to lend fundamental support to diesel prices, with today’s news that Russia had cut 15% of its gas supply to Italy seeming to help ULSD be trading up 4 cents while gasoline is down 4.

The API reported small builds in Diesel and Crude oil inventories last week, while gasoline stocks dropped by 2.1 million barrels. Given that diesel is up and gasoline down, it’s clear the market isn’t too worked up about that report, and may also shrug off the DOE’s weekly report this morning with many focusing on the FED instead.

A week ago, traders in FED Fund futures were only giving 8% odds of a 75 point rate hike in today’s FOMC announcement, but today those odds are up to 95% which seems to coincide with a lot of the selling we’ve seen in equities during that stretch. That big change in sentiment in a relatively short time could be setting the stage for another bout of extreme volatility if the committee surprises the big money bettors again.

Reminder: Monday June 20th is a new Federal observance of Juneteenth in the US. Energy Futures will trade in an abbreviated session but there will not be a settlement Monday, and spot markets will not be assessed. 

Today’s interesting read from the FT: Oil vs Human Rights and the US President’s trip to Saudi Arabia, which also happens to be at the forefront for many [Gulf] Golf fans these days.

Click here to download a PDF of today's TACenergy Market Talk.

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