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Futures Report: Price Action Stagnation

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Technical indicators for June revealed a week of consolidation and widening Bollinger bands. Brent’s RSI briefly entered overbought territory before coming off as prices corrected lower. RBOB saw a correction lower after rising into overbought territory. With the market more balanced there may be more room for bullish entrants. It is important to keep an eye on fundamental factors such as refinery outages as the Port Arthur refinery curtailing production. The open interest in gasoil futures had plateaued, with short-positioned money managers exiting the market.

The correlation for the June tenors mirrored the previous week, with gasoil staying closely tied to crude contracts as Brent Futures dipped below $86/bbl on Mar 21. RBOB crack’s correlation to crude strengthened as the RIN rally stabilised, while the HO crack and gasoil crack remain positively correlated, reflecting similar market drivers in Europe and the US.

The WTI/Brent spread was relatively unchanged, although the deferred parts of the curve shifted slightly lower. Otherwise, it was a directionless and stagnant week in Brent structure.

CFTC data for Brent Futures in the week to Mar 19 showed money managers increased long positions by 50kbbls and reduced shorts by 7.8kbbls, while prod/merc players decreased net positioning by nearly 68kbbls. In WTI, a similar trend occurred with money managers adding 37kbbls of longs and reducing shorts by 7kbbls, whereas prod/merc players removed 23kbbls of longs and 18kbbls of shorts.

ETF flows: market participants saw a week of de-risking in the main crude oil ETFs with open interest seeing a substantial decrease. This comes off the back of profit taking flows in call options following the flat price rally, where selling flows were concentrated in the 10-30-days-to-expiry options.

Refinery margins weakened slightly as Apr’24 margins slid by $0.64/bbl, while Dated remained relatively unchanged. EBOB provided limited support, with ICE gasoil witnessing significant weakness, down by 54c/bbl, amidst concerns over Middle East supply.

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.

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Our team of skilled analysts, by utilising the depth and breadth of Onyx's proprietary data, position ourselves at the cutting edge of market analysis. This unique vantage point grants us an unparalleled perspective in the market, enabling us to identify emerging trends and lucrative opportunities.