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Diesel

Dangerous TradeThis trade has bad idea written all over it. Don’t try this at home. Not investment advice. etc. It has come to my attention that HO i.e.. NY Harbor heating oil which is a proxy petroleum distillate for diesel has gotten more expensive than gasoline in recent years many times and that it has done so in an aggressive manner quite a few of those times. This aggression is easily captured by charting the spread between HO and RB. RB is refinery gasoline. The formula for the spread is HO1! - RB1!. I’ve multiplied it by the contract multiplier of 42000 because each contract represents 42000 gallons and the price of each contract is per gallon. The number on the price axis therefore shows exactly how much money could have been made or lost with this spread. The trade idea is to go long HO and short RB once the spread closes positive twice ie. once diesel contracts start trading higher than gasoline contracts for more than one day within a 2-week period. The alternate trade idea is to just go long HO when the spread turns positive. Opex is on June 25th for both HO and RB July contracts so that’s something to be aware of. July contracts HON 2024 and RBN2024 are the contracts of interest until that options expiration date is reached. You’ll need approximately $20k margin to place this trade, as each contract is currently worth around $100k. This trade is super dangerous because the spread is highly volatile. Don’t do it. The reward/risk is 7.15. The “if nothing goes catastrophically wrong” risk is $4200 and the “congratulations, jack**s!” reward is $30,000.
NYMEX:HO1!Long
by Skipper86
Diesel prices Retail Diesel – Monthly: Currently resting at monthly support of 5.31. (Ichimoku indicator not shown) Daily and weekly swings above and below the blue Tenkan line should be expected. A monthly close below could open the door to the red Kijun line at 4.09. This would be very strong support on a monthly scale. There was a 5 leg event from the 02’ low to the 08’ high. Leg 1 climbed 80% in under 2 years. The 3rd leg high climbed 230% higher in over 6.5 years. The 5th leg high climbed 390% off the 02 lows in just over 9 years. The 16’ low to the 18’ high (Leg 1) climbed 75% in under 3 years. The current (3rd leg) high climbed 190% off the 16’ lows in under 6.5 years. If Diesel can break the trendline above $6.00, historically speaking $9.00+ diesel is not out of the equation… Price risk on higher diesel is warranted. What broke the last strong run higher was the great 08’ recession…
FRED:GASDESW
by mtb1980
EU faces pressure to defuse mounting anger as farmers protest aGiven the mounting anger and protests by farmers across Europe, there appears to be a significant challenge stemming from contradictory and potentially detrimental agricultural policies. The grievances include increased costs for agricultural diesel, additional fees for water consumption, complex regulations, and objections to bans on pesticides and herbicides mandated by the EU's Green Deal. The farmers are also concerned about the import of beef from countries like Brazil and Argentina, which they argue have laxer rules on animal welfare, making competition difficult. This unrest, originating in France but spreading to neighboring countries, signals a broader issue with unpredictable government decisions affecting agriculture. In the Netherlands and Germany, similar protests have arisen over regulations to cut nitrogen emissions and phase out fuel subsidies, respectively. In Germany, there is also resentment over what is perceived as the unfair application of environmental policies. With protests extending to Poland, Romania, Slovakia, Hungary, and Bulgaria, concerns range from unfair competition from cut-price cereals to high taxes and tight regulations. The impact of droughts, floods, and wildfires, combined with the squeeze from green policies, has fueled discontent. For investors, this could be a pivotal moment to consider commodities such as cereals, soybeans, and copper. The disruptions in European agriculture may create fluctuations in the market, making these commodities potentially attractive for investment. However, it is crucial to monitor developments closely as tensions continue to grow, and the agricultural sector shapes up to be a major issue in the upcoming European Parliament elections in June.
AMEX:WEATLong
by Maximus20000
WTI: Crude Oil May Have Bottomed OutNYMEX: WTI Crude Oil ( NYMEX:CL1! ), Micro Crude Oil ( NYMEX:MCL1! ) The talk of inflation deceleration created a wishful misperception. Does a CPI read from 9.1% to 4.0% mean price relief for consumer? Certainly not. Something costed $1 last year will go up to $1.04 this year on average. What really comes down is the rate and the pace of price increase, but the absolute price level has forever gone up. This makes the real decline in energy prices more extraordinary: • On June 23rd, WTI crude oil ( NYSE:CL ) August futures settled at $69.16 a barrel. This is 44% below last June’s high of $123.70; • At $2.44 a gallon, RBOB gasoline futures ( SIX:RB ) declined 34% year-over-year; • At $2.37 a gallon, ULSD diesel futures ( EURONEXT:HO ) price dropped 45% YoY. • At the retail level, the American Automobile Association reports the national average regular gasoline price at $3.57 a gallon on June 25th, down 27% YoY; • The AAA diesel price is now $3.89/gallon, falling 33% YoY. However, the era of low energy prices may be coming to an end. I am convinced that the market dynamic has changed. Elevated geopolitical tension, higher demand and a weak dollar could help pull crude oil out of the bottom, and onto an upward trajectory. Global Tension Forms Solid Price Support A week after the start of Russia-Ukraine conflict in February 2022, Crude oil futures shot up 30% from below $90 to $115. WTI peaked at $121 in June as the fighting continued. Since then, high inflation and rate hikes raised the risk of global recession. As the demand outlook dimmed, oil price lost support and trended down in the past year. Geopolitical tension may have been placed on the back burner, but it never went away. Last Saturday, the Russian private army Wagner Group mounted a short-lived rebellion against the Kremlin. What this means to the Ukraine conflict and the stability of Russia itself remain to be seen. Geopolitical crisis could cause supply shock and raise the price of crude oil. My observation is that global tension will be at an elevated level throughout 2023 and 2024. Oil Demand is Expected to Recover Last July, I called the peak of gas price in this report. I discovered that record $5 gas had caused demand to fumble. AAA gas price surprisingly declined at the start of the traditional summer driving season. Things look different now. Retail gas price creeped up 50 cents (+13%) since December. Many stations popped up gas price ahead of the July 4th holiday. With a still strong job market and inflation in check, consumers are taking their summer vacations. A second key demand factor comes from the US government. The Biden Administration has drawn down the Strategic Petroleum Reserve (SPR) to fight high oil price in the last two years. The Energy Information Agency data shows that the SPR holds 350 million barrels of crude oil as of June 16th. This is 285 million barrels less than the level on January 24th, 2020, the week when President Biden first took office. SPR is now at a critical four-decade low level. The Department of Energy has begun replenishing the SPR. It announced buying up to 3 million barrels in May, and recently planned additional purchase of 6 million in August. Thirdly, the risk of global economic recession is now lower than what we previously feared. This is my most important reason for raising the outlook of future oil demand. • The Federal Reserve implemented ten consecutive interest rate increases since March 2022. US inflation rate has declined from the peak of 9.1% to 4.0% in May. Lowering inflation may have averted the US economy from falling on a hard landing. • The banking failures, from Silicon Valley Bank to Signature Bank, First Republic, and Credit Suisse, have met with swift government rescue efforts. We have so far managed to contain these from spreading to systemic risk. • The resolution of US debt ceiling crisis helped avoid a US default and a likely global financial crisis it may trigger. According to the USDebtClock.org, the US national debt is now $32.1 trillion, which is $700 billion more than the previous debt limit. • The Biden-McCarthy deal in federal spending limits ensures that government budget will not be cut. The federal government accounts for one quarter of the US economy. As bad as it may sound, government spending spree with borrowed money does contribute to near-term economic growth. We just kick the can forward and leave the debt burden to future generations. A Weak Dollar Supports Higher Oil Price Last year, the main investment theme of global commodities market was “Strong Dollar, Weak Commodities” and “High Rate, Low Price”. We are now in a reverse course. The US dollar index peaked at 114 in last September. While the Fed raised rates aggressively, other countries were slow in response, resulting in widening interest rate spreads between the US dollar and major foreign currencies. Since then, the Fed reduced the size of rate hikes from 75 bp to 50 and then 25, while UK and ECB caught up with bigger rate increases. The dollar index has fallen to 100 by April. The Fed paused rate increase in its June meeting. Although it emphasizes in fighting inflation, there is no question that the monetary tightening cycle is now in its last stretch. NYMEX WTI Crude Oil Futures With the key factors discussed above, plus the OPEC having incentive to cut output, I could see WTI going back to the $80-$90 range. December WTI (CLZ3) currently quotes $69.1 a barrel. Each contract has a notional value of 1,000 barrels. Margin requirement is $5,000 to place one contract. Hypothetically, if Dec futures goes up to $80, one long contract would gain $10,900 (=10.9*1000). Theoretical return would be +118% (=10,900/5,000-1), excluding transaction fees. The risk of long WTI is falling oil price. If CLZ3 falls to $65, a long position would lose $4,100. This would result in a Margin Call, with the Exchange requiring the trader to deposit fund and bring the account balance back to $5,000. Alternatively, we could consider the Micro Crude Oil Futures ( CSE:MCL ). Contract size is one tenth of the standard CL contract. And so is the margin requirement. Everything else works the same. Happy Trading. Disclaimers *Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services. CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
Editors' picks
NYMEX:CL1!Long
by JimHuangChicago
22
#Gasoil Update Gasoil Elliott Wave story is less controversial than Crude Oil story . The price rests on Moving Averages support and Gasoil crack appears to be on an upward trend too. This suggests that refinery margins are likely to improve. In practice, this means that Gasoil prices are likely to grow faster than Oil prices, perhaps due to unsatisfied demand for diesel fuel. What I also dislike a bit here is that wave (ii) seems a bit too complicated, being a combination of flat w, simple zigzag x and another simple zigzag y. I was taught that although possible such combinations are rare and shall be used only labeling in retrospective when no other alternatives fit. Now it is part of the ongoing trade and if I am proven wrong I will have to stricten my rules about this combination.
VANTAGE:GASOIL
by Fomenka
Palladium demand destructionThanks for viewing, Some view platinum and palladium not as investment petals for various reasons, others disagree. I prefer (in rank) 1. gold (bullish), 2, silver (neutral), platinum (bearish). Platinum makes the list because I can purchase it in small increments - while palladium was only available in a minimum of 1oz coins (which had high premiums - as coins in general do). That said, I expect platinum to also show future weakness - potentially going sub $350ish - which is okay as it is a strategic metal that is relevant to defence applications among other things. The reasons I expect weakness in demand for Platinum (currently oversupplied) are the same as for Palladium (under-supply); Palladium has had a huge run since 2008 - peaking at 16.5x and now at 10.5x over that time period. The major driver was a supply demand mis-match caused from strong demand from auto-catalysts for petrol vehicles. All that has changed dramatically in a short period. Demand has been destroyed for new motor vehicles. Light vehicle sales were down 34.6% in March www.marklines.com and that drop will be over-shadowed by the April drop. Hopefully, these drops are short-term and will bounce back shortly - like vehicle demand in China did - although estimates vary on the time-frame. I suspect we will see near-term demand reduced from 2019 levels for all of 2020. Medium and long term factors are both negative for those expecting internal combustion light vehicles production levels to bounce bank to new highs. The most major impact will come from an unfolding de-leveraging. For those that blame the health crisis for 100% of the economic woes, please cast your eye a few months back when we had; - an inverted yield curve, - downgrades of global and regional GDP growth announced by the IMF, World Bank, BOJ, ECB, Fed etc etc, - Cautions on the level of sovereign, corporate, and household debt levels, - Interest rates in the US repo market spiking to over 11%, - The Fed started QE4, or what they called "definitely not QE4", - Large investment banks were announcing they were advising their clients to sell US equities because they saw limited upside remaining, - The US continued on its longest and weakest economic expansion in history. My general view is that this health crisis with its associated economic contraction brought forward (and exacerbated) what was already just around the corner - a recession. Any deleveraging event was always going to have to be more significant than 2008-9 simply because debt levels are so much greater now - while incomes have stayed flat. So this will necessarily impact on discretionary consumer demand (and availability of consumer credit) for some time. Price targets; 1300 should provide some support, stronger support at the $1140, and $1100 levels. 1:1 extension of the recent steep drop at $1060. This level may cause a strong bounce in 6 - 12 months (depending on industrial demand pick-up) - but after that who knows. The trajectory now seems to be away from diesel vehicles, especially since the VW scandal (which hasn't yet fully unfolded to reveal just how wide-spread the massaging of emissions results among the industry as a whole). Medium to long-term, there is every possibility that Palladium's new home will be below $1100. Protect those funds everyone
TVC:PALLADIUMShort
by flyinkiwi10
1
dynaCERT - Billions of potential - Hydrogen for Diesel-EnginedynaCERT - Billions of potential with hydrogen technology for diesel dynaCERT has won the German Innovation Award with the innovation 'HydraGEN' and presented the retrofit unit for clean diesel combustion at HANNOVER MESSE and bauma in Munich. Now came the first major order - with billions in potential. The Canadian company dynaCERT has invested more than 50 million CAD in the development of a hydrogen technology over more than 10 years, which has now been ready for the market and series for several months. 'HydraGEN' by dynaCERT produces hydrogen for diesel engines as needed for the combustion process and adds it via the air before. In this context not only increased combustion efficiency was achieved, but also a reduction of nitrogen dioxide by up to 88%, particulate matter up to 55%, CO2 up to 9.6% while reducing consumption by up to 19% , The first 100 of 10,000 'HydraGEN' for Mexico While several customers around the globe have already started pilot projects, the first significant purchase order came from Mexico. Through a distribution partner, a buyer was acquired in Mexico with the Alliance Holdings Group and affiliated unions, which has started the business relationship with a decrease of 100 'HydraGEN' units. The value of the order is expected to be around $ 0.6 million, as a standard 'HydraGEN' unit costs around $ 6,000 CAD. On top of that. In a further step, a total of 10,000 devices are to be delivered to Mexico, which corresponds to an order volume of approximately CAD 60 million. Billions in potential with plant in Mexico A Memorandum of Understanding has been signed with Alliance to pursue a common goal of operating a plant in Mexico capable of manufacturing up to 1 million HydraGEN facilities in the future. Environmental protection and job creation are on the agenda - two good topics. Should it come to a successful cooperation, then this has a sales potential in the amount of several billion CAD. Contribution to the Paris Climate Change Agreement The advantage of 'HydraGEN' is great, because the environmentally friendly solution of dynaCERT brings not only cleaner air for the population but also economic benefits from fuel savings for Mexican companies. The commitments of the Paris Agreement on Climate Change will provide supportive technology through the introduction of 'HydraGEN' to comply with emission limits. Telematics software provides transparency With new vehicle telematics software called 'HydraLytica', users of 'HydraGEN' get easy access to reports on fuel consumption and CO2 emissions reduction in diesel vehicles and machinery. This allows companies, truck drivers and fleet operators from the on-board computer to control automatically calculated savings in diesel and CO2 emissions, dynaCERT said in its latest release. 'HydraLytica' reads the data directly from the diagnosis port ('OBD' port) of the on-board computer in the truck and forwards this data to the cloud server of dynaCERT. Once the 'HydraGEN' unit is up and running, HydraLytica will calculate fuel consumption and distance traveled and calculate fuel savings and pollutant emissions savings in kilograms of CO2 equivalent. Generate and prove CO2 certificates Jim Payne, CEO of dynaCERT, said in the recent release, "Our new technology reporting system is a great and innovative addition to our product line and now provides clear benefits that users of our 'HydraGEN' technology have demonstrated with their own fleets can be made. Truck owners can now justify the cost of installing 'HydraGEN' units in their trucks. It is also a necessary first step in generating and demonstrating CO2 certificates on the operation of diesel engines. We want to share this with truck owners and fleet operators as soon as the submission of our documentation to the United Nations Framework Convention on Climate Change ('UNFCCC') and the 'VERRA VCS' program for such carbon credits has been completed. " Irreplaceable diesel engines offer enormous potential We assume that the dynaCERT share will gain increasing attention in the coming months. At $ 0.275 per share, the company is currently worth around $ 75 million on the stock market. As soon as further purchase orders for 'HydraGEN' are received in significant quantities, the share price should rise. The technology of dynaCERT is contemporary and offers enormous potential due to the irreplaceable nature of diesel engines in many economic areas. Translated article from Jörg Schulte Greetz from Hanover Chart from Stefan Bode
DLong
by StefanBode