Summary
Mar’25 Brent futures strengthened, rising from $73.40/bbl on 30 Dec to $76.90/bbl on 6 Jan, with higher highs and lows. The RSI entered overbought territory on Jan 3, while Bollinger bands widened due to increased volatility. The MACD indicated bullish momentum, but price gains may reflect opportunistic profit-taking in low liquidity.
Mar’25 European gasoil futures rose above $700/mt on 6 Jan after starting the week strong. Resistance was seen around $705/mt. Daily Doji candles (Jan 3 & 6) suggest potential weakness ahead. Despite bullish MACD signals, the failure to sustain above the upper Bollinger band raises questions about durability. US middle distillate demand weakened, but the cold snap may provide support.
Mar’25 RBOB gasoline futures Prices climbed from below $2.00/gal on 30 Dec to above $2.10/gal on 6 Jan, briefly surpassing the upper Bollinger band before correcting. The Mar’25 crack rose to $11.45/bbl on 2 Jan but faced resistance and settled near $10.80/bbl. US gasoline stocks rose sharply (+7.7mb), and cold weather may impact near-term demand. OI in the Mar’25 RBOB future surged, with open interest rising from 71.6mb on 31 Dec to over 80mb by 2 Jan, following a flat period around 70mb in late December.
The Brent/WTI forward curve remains flat until 2H 2025, with a slight contango in the Mar/Apr box. Money managers increased net long WTI positions (+22mb) but reduced Brent positions (-28mb). The 12-month Brent curve strengthened through 27 Dec, with the front better supported than the back, with overall flattening. The Mar/Jun/Sep fly rose from 27c/bbl to 33c/bbl, recovering after initial weakness to 31 Dec.
This week, USO, UCO, and SCO options experienced predominantly bearish flows, marked by notable trading activity. In USO, 3 Jan stood out as the most bearish day, with traders selling a net equivalent of 168k shares, primarily through call selling. However, on 31 Dec, there was a shift, as traders bought 123k shares, driven by strong call buying and a 2.1% increase in open interest. UCO followed a consistently bearish trend, with the heaviest selling on 3 Jan, amounting to 70k shares, largely from call selling. Activity was particularly strong in options set to expire within 10-30 days, with professional trades dominating the single-leg notional volumes. SCO mirrored this bearish sentiment earlier in the week, with significant selling on 2 Jan as traders sold 26k shares through call selling. However, the trend reversed on 6 Jan, when traders bought 9k shares, supported by put selling and call buying. Across all three ETFs, professional and institutional traders were key participants, contributing significantly to the large delta volumes.
