Prices have strengthened in the Brent futures, RBOB futures and the ICE LS gasoil futures for the Apr tenor. From a technical perspective, the Apr Brent and RBOB futures are in neutral territory with the RSI around the 60-handles, signalling upward momentum. Prices for the Apr gasoil futures, on the other hand, are in overbought territory as the RSI sat at 76.3 on Feb 09. The latter saw an upward price action that was only 0.6% below the upper Bollinger band.
We saw correlations between crude and products stay rather similar with the exception of RBOB with both other crudes and products. Indeed, RBOB initially saw a sell-off but then recovered faster than the rest of the oil complex, before seeing another downward price action as other products were seen strengthening, thus contributing to a very uncorrelated price action.
The front WTI/Brent boxes weakened over the week with a structure further in contango as the curve steepened. However, comparing each tenor to last week’s levels, prices are higher with the Apr Brent/WTI going from -$4.62/bbl in the week to Feb 02 to -$4.56/bbl in the week to Feb 09. The rest of the curve also shifted upwards. Flies were stronger in the week to Feb 09 as both the Apr/May/Jun and the Jun/Sep/Dec reached into positive territory.
In the latest CFTC data, the week to Feb 06 saw money managers adopting a more bearish stance, in line with a decreasing price action. Net spec positioning in Brent saw a relative larger closure of long positions than shorts. Net positioning for money managers in WTI saw a drastic decrease, worth 60mbbls.
The EUR/USD, the GBP/USD, and the USD/JPY saw relatively more bearish interest over the last week with the GBP/USD notably seeing a 20% decrease in length coupled with a 29% growth in short interest.
In the week to Feb 09, M1 European refinery margins increased by $2.32/bbl over the last week, driven by product performance with notable contributions from gasoil and EBOB cracks.
ETF flows indicated a relatively bullish week for USO and UCO. Coupled with a bearish action in SCO, this indicates a positive outlook for the crude complex.
In US equities, we saw the S&P and Nasdaq strengthen by 1% and 2%, respectively. Participants will be awaiting data on CPI inflation and earnings reports by a slew of companies due this week.
Volatility Skew for Brent and WTI saw puts continue to rise past calls, insinuating the market continues to look for protection from downside risk.
