Seasonally, investors tend to adjust their positions in the Energies sector as winter turns to spring across North America.
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Money tends to flow out of distillates (heating oil, etc.) and into RBOB gasoline.
Commodity Bulletin: From crude oil to coffee, this FREE newsletter is for industry pros and rookies alike WTI crude oil remains a constant, providing a spread opportunity, as it tends to rally through the end of June.
On Monday’s Agriculture of America talk show I talked with host Jesse Allen about the seasonal switch in the Energies sector from distillates (heating oil, diesel fuel, jet fuel, etc.) to RBOB gasoline.
The seasonal study for distillates (HOJ25) shows a rally from the first weekly close of December through the last weekly close of April.
- The spot-month contract tends to gain (based on weekly closes only)
- 16% (5-year index) and
- 15% (10-year index)
Meanwhile the seasonal study for RBOB gasoline (RBK25) shows the seasonal uptrend tends to accelerate from the second weekly close of March through late May.
- The spot-month contract shows a gain of
- 12% though the last weekly close of May (5-year index)
- 11% through the fourth weekly close of May (10-year index)
It’s also worth noting funds are starting to adjust their net-futures position to fit with this seasonal move. In the latest CFTC Commitments of Traders report (legacy, futures only), for positions as of Tuesday, March 18.
Watson held a net-short futures position of 15,508 contracts in distillates, a switch of 16,878 contracts as of Tuesday, March 18.
- This included a decrease in long futures by 12,006 contracts
- and in increase in short futures of 4,872 contracts
On the other hand, Watson held a net-long futures of 37,629 contracts in RBOB gasoline, an increase of 19,053 contracts
- This included an increase in long futures of 3,161 contracts
- and a decrease in short futures by 15,892 contracts
Why the seasonal switch? As North America moves out of winter, when heating oil sees its peak demand, it moves into driving season. This increases the demand for RBOB gasoline, and ethanol, before tapering off heading into summer. It should be noted WTI crude oil (CLK25) stays seasonally strong through the end of June before its pattern turns down.
On the date of publication, Darin Newsom did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
