HO Update
Distillates have performed very poorly over the last few trading sessions -lagging the other energy contracts. We suspect that this is a function of 2 things in particular.
For one, the slowdown in US manufacturing seen in data issued late last week. December saw a 5th straight monthly drop -and the December number was the worst since June,2009 (CNN) Manufacturing and economic activity have a large effect on distillates -since they are used for freight in trucking, shipping and rail transport.
Secondly--winter has not arrived yet in the US with enough force to see a big pick up in demand to boost prices considerably.
EIA data out today showed distillate supplies increased by 5,33 mln bbls --following last week's build in distillate supplies of 8,776 mln. Supplies remain 8% below the 5 yr avge for the period. But this week's demand for distillate is seen as 3.373 mln bpd -- a less than encouraging figure to us ( we like to see the demand over 4,0 mln ).
technically the ULSD / Ho has a key reversal setting up today---a new fresh high for the move -but a settlement below the low of the previous session--indicating buying exhaustion ...Weekly ULSD chart shows a possible turn to negative momentum for the contract ----support at 1.960 has been tested today with a low of 19593---below this we see support in the 1.9300 area. Resistance on the upside lies at the 2.0125 then 2.0400 areas---the market for ULSD on the CME made 3 stabs above 2.100 in the past several sessions due to the Mideast tension.
Yet, overall oil supplies have not been disrupted and if they were- there are a few analysts who believe that higher oil prices would dent overall global economic demand ---not a positive for distillate.
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