Could Gasoline be getting ready to join the commodity parade
I have been watching the continuing pressure on WTI crude which has taken it down towards the $84 level all the while as Brent Crude has managed to hold relatively firmly above the $100 level. One would be tempted to think that gasoline prices would be suffering the same fate as WTI but that has not been the case. It has been moving steadily higher as WTI has been moving steadily lower and has been grinding higher over that same period.
It is now within a whisker of staging an upside breakout on the charts. If it can clear what has been decent overhead resistance near $2.55, it should commence another leg higher in its near uninterrupted run since August of last year.
The implications for consumers are obvious as most of you have probably already noticed every time you pull into a gasoline station to fill up your tanks. It certainly would not hinder gold from moving higher!
Hi, Dan. I know you explained it last week but the spread between WTI and Brent is reaching laughable levels. At some point, doesn't it have to snap closed pretty quickly?
ReplyDeleteI would think it would have to turn sooner rather than later mainly because you start reaching a point where arbitragers will pick up on it. Even though the two crudes are different, when you start getting near a $20 discount in one more, that has to perk up some interest.
ReplyDeleteWe do seem to be in some sort of new era in which the old spread levels are obsolete. I am watching spreads in the corn market that are mind boggling but they just keep getting wider and wider.
One of the problems with these spreads is that we have so many hedge funds jamming money into these markets that they are completely distorting the old historical norms.
The mannner in which they buy generally means that they pour money into the active contracts. They do buy the more distant ones as well but not to same extent as the front months. This has the effect of grossly distorting the spreads but no one seems to care anymore.
used to be the spreaders were large enough to handle the fund buying and they would correct the spreads when they got out of line. today, no one can compete which the sheer size of the funds and their buying so no one even bothers to try.
The short of it all is that the funds have now become the markets.