Investment traders cautious about energy markets

The partial government shutdown created uncertainty in the marketplace. Traders, who need volatility and price shits to maintain expected returns, reacted to the situation in different ways.
By Rick Kment | November 25, 2013

Oct. 25—Following the partial government shutdown in October, commercial and noncommercial (investment) traders took varied approaches to the lack of government activity and uncertainty surrounding the potential default on the national debt. RBOB (reformulated blendstock for oxygen blending) gasoline prices, for example, rallied 10 cents per gallon through the first half of October. But in the time since the debt ceiling and short-term funding agreement was reached, prices have fallen 15 cents per gallon. This added some much-needed volatility back into the commodity market. 

On the other hand, crude oil has remained choppy over the past month, and not until after the government shutdown ended did active pressure develop through the complex. Crude oil prices are trading at lows not seen since June and a break below $100 per hundredweight may be creating some psychological pressure on the overall energy markets. 

Ethanol prices have taken an interesting ride over the past month, with markets focusing on overall energy market direction rather than the shifts in corn markets. But to the credit of traders who need volatility and price shifts to maintain expected returns, the corn market has nearly flatlined over the past month, barely able to break out of a 10-cent-per-bushel trading range. In late October, prices closed fractionally lower through the whole complex and only changed 1 cent per bushel for the week.