Despite a tailwind from hurricane related refinery shut-ins, gasoline has failed to hold above $1.70/gallon for the third time in less than a year. With the end of summer driving approaching and the potential for distorted inventory reports, gasoline may remain active in the coming days and weeks.
Technicals:
For most of the last year, gasoline has been stuck in a trading channel between $1.30 and $1.70. In April, July and now August, gasoline has tried but failed to decisively break out of this range to the upside.
A third technical failure confirms $1.70 channel resistance and (”three strikes and you’re out”) leaves gasoline vulnerable to a downward correction, particularly with a negative RSI divergence also emerging recently to indicate weakening upward momentum.
Initial support in a downturn may appear near $1.68, $1.63 then the 50 and 200-day averages closer to $1.55.
Fundamentals:
The big storm has led to the temporary shuttering of the big Gulf Coast refineries which could lead to shortages refined products like gasoline in the coming weeks. At this point it remains unclear how much damage has been done and how long these shut-ins may last. Weather related disruptions are usually seen as temporary by the markets and price spikes can vaporize just as fast as they materialize.
Traders should note that we are still in the seasonally weakest time of the year for gasoline which runs through November. Summer driving season (peak demand for gasoline) ends with the upcoming Labour Day long weekend.
Due to the storm impact, we could see significant swings in gasoline inventories in the coming weeks which could have spark significant swings in the gasoline price.
CMC Markets is an execution only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
CMC Markets Canada Inc. is a member of the Investment Industry Regulatory Organization of Canada and Member-Canadian Investor Protection Fund / Membre-Fonds canadien de protection des épargnants. CFDs are distributed in Canada by CMC Markets Canada Inc. dealer and agent of CMC Markets UK plc. Trading CFDs and FX involves a high degree of risk and investors should be prepared for the risk of losing their entire investment and losing further amounts. CMC Markets is an execution only dealer and does not provide investment advice or recommendations regarding the purchase or sale of any securities.
CFD and FX trading with CMC Markets is only available in jurisdictions in which CMC is registered or exempt from registration, and in Alberta is available to Accredited Investors only. CMC Markets neither solicits nor accepts business or accounts from residents of the United States of America.
Disclaimer: CMC Markets is an order execution-only service. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.
