OIL PRODUCTS: Euro Gasoline Rallies on Refinery Disruptions and Octane Tightness
The front month European gasoline crack spread is holding just above the previous close after seeing a strong rally last week to the highest since July 2022 and the highest for this time of year since at least 2011, according to Bloomberg data. Cracks have rallied amid refinery disruptions, hot weather, low inventories, and octane tightness.
- Recent refinery disruptions have added to the crack support with hot weather in Europe making it harder to run lighter crudes according to Energy Aspects and Goldman Sachs.
- The strength is also partly driven by octane tightness according to Sparta Commodities and likely being exacerbated by a number of unit outages over recent months.
- Logistical issues, with dropping Rhine levels and ARA cargo congestion, could also be limiting the supply of gasoline blending components in NW Europe according to Wood Mackenzie.
- Demand is good in Europe and the US according to FGE and supported by goods-to-services rotation, high global employment, and diesel-to-gasoline switching in Europe post diesel-gate according to Goldman Sachs.
- EU Gasoline-Brent up 0.5$/bbl at 28.41$/bbl
- US gasoline crack up 0.5$/bbl at 39.11$/bbl
Source: Bloomberg
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USDCAD TECHS: Trend Needle Points South
- RES 4: 1.3419 50-day EMA
- RES 3: 1.3355 High Jun 15
- RES 2: 1.3324 20-day EMA
- RES 1: 1.3270 High Jun 20
- PRICE: 1.3198 @ 16:44 BST Jun 23
- SUP 1: 1.3139 Low Jun 22
- SUP 2: 1.2992 50.0% retracement of the Jun - Oct 2022 bull rally
- SUP 3: 1.2954 Low Sep 13 2022
- SUP 4: 1.2895 Low Aug 25
USDCAD is trading closer to this week’s lows despite a modest bounce Friday. The downtrend remains intact. Fresh trend lows this week strengthens bearish conditions and maintains the price sequence of lower lows and lower highs. Moving average studies are in a bear-mode position, highlighting current sentiment. Scope is seen for a move towards 1.2992, a Fibonacci retracement. On the upside, firm resistance is seen at 1.3324, the 20-day EMA.
AUDUSD TECHS: Pullback Extends
- RES 4: 0.6993 76.4% retracement of the Feb - May downleg
- RES 3: 0.6921 High Feb 20
- RES 2: 0.6857/6900 High Jun 20 / 16 and key resistance
- RES 1: 0.0.6737/6806 20-day EMA / High Jun 27
- PRICE: 0.6682 @ 16:35 BST Jun 23
- SUP 1: 0.6663 Low Jun 23
- SUP 2: 0.6627 61.8% retracement of the May 31 - Jun 16 rally
- SUP 3: 0.6610 Low Jun 6
- SUP 4: 0.6562 76.4% retracement of the May 31 - Jun 16 rally
This week’s pullback in AUDUSD has resulted in a break of the 20- and 50-day EMA values. The break of the 50-day average, at 0.6704, suggests potential for a deeper retracement. The next support lies at 0.6627, a Fibonacci retracement point. A break of this level would strengthen bearish conditions. Initial firm resistance is at 0.6806, the Jun 27 high. Clearance of this level would ease a bearish threat. Key resistance is 0.6900, Jun 16 high.
US TSYS: US PMIs Follow Weaker EGB Metric's Lead
- Treasury futures trading firmer after the bell, but holding to narrow range since late morning after scaling off from post-data highs: TYU3 currently 113-01.5 +10 vs. 113-15.5 high; 2s10s curve at -101.173 after extending inversion to -103.544 low vs. March' 40Y low around -110.0.
- Fast two-way trade noted earlier as front month Treasury futures extended support then reversed after S&P Global US PMI data comes out lower than expected: Manufacturing PMI (46.3 vs. 48.5 est); Services PMI (54.1 vs. 54.0 est) Composite PMI (53.0 vs. 53.5 est).
- Treasury futures tracked higher EGBs overnight after lower than projected European PMIs overnight (France servicer PMI 48 vs 52.1 est; Germany mfg PMI 41.0 vs. 43.5 est; EU and UK softer as well).
- Cooler inflation metrics slightly tempered projected US rate hike at one of the next three meetings, though Nov'23 implied rate still fully pricing in a hike. First full 25bp rate CUT has pushed out to May 2024.
- Atlanta Fed Pres Bostic (non-voter in 2023) comments at Bank event with CFOs contributing to latest move: NOT SEEING ELEMENTS OF RISK APPEARING IN ECONOMY, Bbg.
- Meanwhile, SF Fed Pres Daly could be one of the 9 FOMC members in the two-hike camp for 2023, telling Reuters that 50bp of further tightening this year is "a very reasonable projection at this point...but no decision, for me, has been made." Echoing Chair Powell's comments the past two weeks, Daly said "it is, in my judgment, prudent policy... to slow the pace of policy as you near the destination."
