Technical indicators indicate an oversold RSI for Brent, ICE gasoil and RBOB gasoline futures alongside flat price that traded below all three contracts’ respective 20-day simple moving averages, flagging bearish short-term momentum. Moreover, Bollinger bands have now widened for the RBOB futures, signalling increased volatility in the contract.
Correlations between heating oil cracks with all other contracts was markedly more positive on May 16, highlighting the ubiquity of weakness across crude and oil products. RBBRs have been less correlated with the crude benchmarks this week despite still flagging positive correlations.
The WTI/Brent spread shifted higher w-o-w and is now stronger in the prompt relative to backend tenors. The Brent futures forward curve also edged up relative to the previous two weeks.
CFTC data for the week to May 14 signalled a substantial removal of managed by money length in Brent with nearly 45mbbls of these positions removed from the futures. WTI futures saw both longs and shorts liquidated by 6.4mbbls and 21mbbls, respectively.
In ETF flows, USO saw more risk into the week albeit to the sell side with NOD hitting below -110k on May 17. UCO also saw muted volumes which were skewed towards selling with the put/call ratio rising by over 26%. SCO also saw bearish net option delta flow albeit in very small volumes.
The June European refinery margin increased by nearly $1.15/bbl despite Brent ending the week higher for the first time in three weeks in the week to May 17. This support came by from stronger oil products, especially gasoline and gasoil.
In currencies, the USD cratered following May 15’s CPI announcement and the DXY fell from over 105 on May 14 to 104.10 the following day. In precious metals, copper prices have skyrocketed to new highs, especially in the US, and are now somewhat divergent from the underlying fundamental picture. Implied volatility shifted lower in both the Jul Brent and WTI futures across OTM put and call options.
