Gasoline futures are less bullish in the wake of increasing stockpiles before the Untied States was hit will the recent cold spell. Cold temperatures are likely to decrease demand, so fund managers are decreasing net-longs by a whooping 22 percent in the week ending on January 14, according to Commodity Futures Trading Commission (CFTC). Net-shorts doubled.
The Energy Information Administration (EIA) weekly inventory report showed supplies increasing to 233.1 million barrels, the highest since February 8. Gas prices have hit a three-week low, and temperatures from the Midwest to the Northeast are forecasted to be lower than normal.
Tom Finlon, director of Energy Analytics Group Ltd., said “everything out there right now is bearish for gasoline” Finlon said seasonality is another issue as demand is typically low this time of year.
Gas futures have been down since peaking in late December. Price action had broken through the 20, 50, 72 and 200 EMA, and contract open interest has plummeted.
On the daily chart, the price action has been suppressed by the 78.6 percent, or $2.6323 per gallon, Fibonacci retracement of the yearly low of $2.4945 per gallon made on November 7.
The shift in sentiment should pressure support at $2.595 per gallon. Short-term target of $2.5454 is initiated on broken support. However, if price action can close above resistance, upside potential is seen at the 20 EMA, or $2.6633 per gallon.