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Sellers Looking for Positions as Global Risk Unwinds

Market Overview

Risk premium that was priced into the energy complex because of tensions with Syria is beginning to sell off. While the coordinated strikes on Syrian chemical weapons facilities by the United States, Great Britain, and France was a clear escalation of intent, selling pressure found its way into the market as traders see a lower probability of future military action. The White House has made it abundantly clear that military intervention will not be the new norm and that the United States is only interested in prohibiting the use of chemical weapons.

The calendar this week is packed with key economic indicators. China is releasing GDP data late this evening and analysts are expecting flat numbers compared to the previous report. Wednesday should be the most volatile for commodities with Great Britain and New Zealand releasing CPI figures, the Bank of Canada issuing their rate decision, and Australia posting employment numbers. We finish out the week with CPI figures from Japan on Thursday and Canadian CPI on Friday.

Technical Analysis

WTI Futures

On the daily, WTI front month futures are trading just below channel resistance after challenging the level last Wednesday through Friday. Price had a clean rejection off this level three weeks ago as stochastics rolled over and technical sellers entered the market. Given the proximity to resistance from the trendline and highs made on January 1st, technical traders will try to play it short in anticipation of a move back to trendline support. If news headlines cooperate, we expect to see technical traders try to push price below $66.00 and trigger additional selling. Current stochastics are on track for a bearish sell signal if price remains suppressed through the afternoon session.

ULSD Futures

ULSD continues working in a bullish channel similar to WTI and is testing trendline and horizontal resistance around $2.10. There is still some room to the upside before we reach major resistance which is just under $2.15, but stochastics is currently offering a stronger sell signal than in WTI. If these levels hold into the close, we should see sellers taking more interest over the coming sessions.

RBOB Futures

RBOB is about 5 cents shy of major resistance at $2.10 after falling from channel resistance at $2.0750. RBOB has a clear line of sight to channel support between $1.93 and $1.95 with only minor support at $2.00. If sellers can take hold of the energy complex, RBOB should see little intervention until $1.95. Stochastics is set to offer a bearish signal if price can maintain its current positioning into the close.