Technical indicators for June revealed a week of softening prices in a risk-off attitude across the product groups. Brent remains supported above the 20-day SMA although it is likely players were hesitant to put on much risk ahead of the long weekend. RBOB also rose into overbought RSI territory in low liquidity on Mar 28 although prices remain between the wider Bollinger bands.
Looking at the correlation matrix, the key changes this week have been between heating oil crack and crude contracts which became much more negative as prices were decimated given the lacklustre demand for heating oil in the US.
Looking at the forward curve for Brent, we can see a significant shift higher w-o-w with the strength largely concentrated at the front of the curve as evidenced by the sharp increase in the flies. The WTI/Brent spread narrowed as US grades now look attractive to pull into Europe given that refinery turnarounds are coming to an end.
WTI prices averaged $81.39 per barrel, with CFTC data showing money managers adding 110kbbls to their net positioning as long and short positions were quite evenly matched. Prod/Merc players took off over 15mbbls of net positioning as the 21.187mbbls of long positions were overpowered by the 36.248mbbls of short positions in the week
ETF flows: Looking at the ETFs, it seems we are seeing more bullish signals despite more bearishness in the UCO last week. The USO and UCO are giving buy signals while the SCO is giving more negative signals, which is overall more bullish for Brent.
Refinery margins weakened slightly as the European M1 margin lost $1.91/bbl in the week to Mar 29. The loss was crude driven following a better-supported DFL structure in the front although the physical cargoes remain offered across the grades. EBOB saw slight support from fairly consistent summer buying interest but the rest of the products saw little gained and little lost in the week.
The USD saw a second consecutive week of gains. This was supported by the significant rebound in US Treasury yields on the back of a hawkish repricing of the Fed’s monetary policy outlook.
The S&P 500 and NASDAQ Indices saw continued strength, closing Q1 up 10% and 9.3% respectively, while the PCE index increased 2.8% on a 12-month basis, up 0.3% from the previous month.
