Bearish trends emerge in the crude market
February 24, 2025
The Baker Hughes Rig Count called the oil rigs up 7 to a total of 488 a fourth consecutive gain. Last year there were 503.
Energy markets had a good sell-off on Friday as prices for crude oil traded back down near recent lows, and the last two weekly charts look bearish. Front month gas closed below recent lows and is testing its 100-day moving average. The weekly chart for gas looks bearish. ULSD pulled back into the middle of its recent range and is testing the 20-day moving average. The weekly chart also looks bearish. As we have been saying, these markets have been stuck in congestion and trading in a range for some time now. Friday was a bearish day, but until the bears can take out and settle below support, the market will continue to be rangebound. It appears now that the bears have a chance to sell this market off more, but we have been here before only to see prices rally and stay congested. If these markets are going lower, the bears need to follow through and take prices lower; otherwise, we rally back into the middle of the range and continue to congest.
US distillates have fallen to their lowest seasonal level for more than two decades. Stocks have been 22 million below the ten-year seasonal average so far in February compared with a deficit of just 3 million in gasoline. Total inventories of diesel are currently 116.564 million. Last year, they were 121.651,, and the year average is 121.008. Demand has been up due to the cold temperatures, and all this is a concern, but at the same time, the prompt cash basis on Friday was roughly 33 under the NYMEX. That is not a level that shows concern by the market that supplies are tight. It is a bit of a baffling situation. Historically, the basis can be low demand for this time of year is traditionally lower. Low basis and an NYMEX that has been trying to move lower bears watching as it could provide a buying opportunity for either filling up tanks or purchasing forward contracts, depending on your situation.
Traders continue to watch for a clue about the end of the Ukraine-Russian war, which could soften prices. They are also watching the latest development between Turkey and Iraq, which reopens an export line between the countries that has been down since March 2023.