We discussed the growing imbalance in the unleaded gasoline market last week here at Equities.com. Our primary focus was based on two points. First, the fundamentals in the petroleum sector are bearish. Secondly, the commercial traders as a group have now turned negative on their own product at these prices. These two factors have grown in strength over the last week and Monday’s weakness finally triggered an official COT Sell signal.
Moore Research is the virtual leader in seasonal commodity analysis. Their research shows that 14 out of the last 15 years that May unleaded gasoline futures have rallied between early February and early March. One of the primary reasons for this rally is the beginning of the shift away from winter gasoline blends and the production of summer blends heading into the Memorial Day party time. Their research is based on statistical analysis that describes what, “normal” seasonal market behavior is. However, there is a considerable case to be made that the current situation in the energy complex is anything but, “normal.”