Energy Futures Starting 2019 On Weak Note

Energy futures are starting 2019 on a weak note, with most contracts trading down 1% or more in sympathy with a selloff in stock markets around the globe. Weak manufacturing data from China seems to be taking blame for the early selling as it stokes fears of an economic slowdown.

As the table below shows, 2018 was a negative year for energy and stock prices and an EIA report this morning details how substantial the drop in energy prices was compared to other commodities in the past quarter.

So where are prices headed in 2019? To start, both WTI and RBOB are trading dangerously close to technical “trapdoor” levels that could open the door for another 10-20% of downside in short order. ULSD futures briefly reached a new 16 month low overnight, which could set up a test of the $1.50 range (some 16 cents below current levels) if we don’t see a bounce soon. Brent looks slightly stronger from a chart perspective, but also needs to carve out a bottom soon if it’s going to resist the pull lower from the NYMEX contracts.

Near term there may be little hope either fundamentally or technically for energy futures, but most years the complex figures out a way to rally heading into spring. Keeping in mind that many were calling for $100 oil back in September, it would probably be good to take any calls for an outright price collapse with a grain of salt.

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