Is the rebound in Gasoline running on fumes?

If you’re just waking up from your tryptophan induced Holiday slumber, there’s an interesting trend developing in Gasoline Futures (RB).  Gasoline hit 2.50 on November 7^th, representing their lowest level in two years and a drop of about 20% from the recent high in late August.  We had seen a two week rebound of 8% run out of, well gas, on the 21^st, and we now sit at 2.68 with plenty of news to suggest we’re stuck here or going lower.

Inventories are back up at normal levels for this time of year, and refiners are concluding maintenance work which will put significant capacity back online.   The Iran Nuclear agreement on the 24^th has put short term pressure and longer term expectations of Iranian supply into play.  The EPA’s announcement in early November, requiring less renewable fuel to be mixed in than expected for 2014, should reduce costs.  And the good news, last week’s better than expected Jobless Claims numbers, did little to impact the price to the positive side.  Is there any reason to be bullish at this point?

To answer this question, we looked at past investor behavior in similar historical trading environments to see how investors are likely to respond today.  Specifically, we looked at the YTD price pattern in Gasoline (RB) and used the EidoSearch engine to search across all Energy Futures contracts historically to identify when we’ve seen this trading pattern in the past, and then to see what has happened historically in the next one month.

The result:  We have seen this trading pattern in Energy Futures 11 times, 10 times since 2009, and we have NEVER seen the price be down in the next one month period.  The average one month return of all 11 historical instances is 10.44%.       

Charts attached below

YTD chart for Gasoline (RB)

11 highly correlated historical instances of the above pattern in Energy Futures, with average returns of

10.44% one month forward