Market Insider

Commodities Watch: Petroplus Bankruptcy, Nat Gas Rally Continues


Check out how commodities are trading in Tuesday's trade:

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Energy Prices: While concerns over Greek debt negotiationsovershadow the possible longer-term impact of the EU's embargo of Iranian crude, a fuel shortage is a more immediate concern to Europe.

The credit problems and now bankruptcy of of a leading refiner underscore the poor economics for refineries around the globe. Overnight, Europe’s largest independent refiner Petroplus Holdings announced it is filing for insolvency.

At the NYMEX, Brent, WTI oil and RBOB gasoline futures trended lower on the news, but prices for heating oil (viewed by traders as a proxy for diesel fuel) were slightly higher.

However, with the closure of non-profitable refineries in the OECD countries, Barclays Capital analyst Amirta Sen notes that "among products, RBOB gasoline is likely to benefit the most, given the gasoline bias of these refineries, and adds further strength to our recommendation of being long summer RBOB gasoline spreads." Swiss-based Petroplus supplies about 19 percent of the United Kingdom's gasoline demand and 11 percent of its diesel consumption.

Natural Gas: The rally for natural gas continuesfor a third day, as shorts covered positions amid signs that decade-low prices may be forcing producers to cut back on production. Natural gas futures gained nearly 9 percent in the previous two sessions. Volume reach an all-time high in Monday's session with nearly 800,000 contracts traded. On Monday, Chesapeake Energy—the second-largest natural gas producer in the U.S.—took a drastic measure to curtail supplyand announced it will cut its gas drilling by half.

Gold: The precious metal is taking a breather, easing from a six-week high. A number of factors are involved, including an upcoming expiration of February gold options on Thursday and a short-term bearish trend. Some traders expect gold to test $1,600 later this week, due to expiration. Gold futures hit a session low of $1661 an ounce earlier this morning, down about 1 percent from Monday's close.