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Ship Hits The Fan – Middle East Tensions On The Rise

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From a technical standpoint, Apr Brent futures saw prices strengthen to above the upper Bollinger band, however, the RSI remains in neutral territory around 60. RBOB futures saw a strong week with the Apr contract rising to highs of $2.50/gal on Jan 25. The upper Bollinger band has been crossed and prices were 0.5% above it on Jan 25. The RSI is in neutral territory, although has been strengthening along with prices. Gasoil futures followed a similar trend with price action strengthening, in turn displaying overbought territory on both a Bollinger band and RSI basis.

This week, correlations between Brent and products strengthened over the past week. RBOB crack saw strongly positive correlations with crude prices, as RBOB crack and Brent went from 0.67 to 0.78 on Jan 25, week-on-week.

The front WTI/Brent boxes has continued to strengthen although is still in contango territory. The Apr/May box traded from -7.55c/bbl on in the week to Jan 19 and rose to -5.04c/bbl in the week to Jan 26.

In the latest CFTC data, money mangers and prod/merc saw an inverse relationship in both Brent and WTI futures, with WTI seeing net length from money managers whilst prod/mercs were net short. Brent saw the opposite pattern with bearish positioning by money managers and bullish for prod/mercs.

EUR/USD has continued to be pressured over the last week, hitting its lowest since mid-December. The USD/JPY has stagnated over the last week, with a mean-reverting behaviour around 148 and a clear resistance point at 149.

For the week to Jan 26, European refinery margins were product driven, with strength in EBOB and gasoil lifting margins in spite of strength from Dated.

ETFs flows indicated an overall mixed bags of net deltas. USO flows being mostly positive has signalled a bullish market sentiment. UCO however was more bearish in the last 5 trading days. Along with bearish interest in the 10-to-30-days-to-expiry options for UCO and a bullish interest SCO for the same days-to-expiry options, this signals a bearish outlook for Brent for late February, start of March.

In US equities, the S&P and NASDAQ continued on their upward trend over the past week, rising by 1.05% and 0.95% respectively. The S&P 500 continued to break record and closed at an all-time high the fifth consecutive session on Jan 25.

The volatility skew for the week to Jan 26 has shifter lower, signalling the market is less willing to protect itself from upward or downward price action. Apr WTI continued to see a more bearish market relative to Brent with the 10DP to 10DC disparity stronger than for its European counterpart.

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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.