Refining margins are strong

Crack spreads in gasoline and heat has given up part of its strength, presumably on profit taking and words that strikers are making progress in negotiations with Shell in the US. These though are masking the fact that refining margins have been extremely strong, and remains very much so. Physical traders have pointed out Naphtha as the leader in strength, followed by high sulfur fuel.

Whilst SFOT has no idea why asia is buying so much petrochemical, it seems that fuel oil strength comes from the fact that OPEC has fulfilled a good part of their announced cuts, hence favouring the heavy product that comes mainly from sour crude. With more evidence of compliance from OPEC members, SFOT can only believe fuel oil cracks will remain strong. In the meantime, middle distillate stocks are very well supplied and storage is reported to be almost to the brim in Northwest Europe. Middle distillate has a higher elasticity of demand, hence base effect should lead to demand falling dramatically vs year ago. SFOT will be long fuel against heat/gasoil cracks in this scenario.

Finally, a bit of a football transfer deadline award.. a colleague of mine insist we have to give an award to Robbie Keane for being the trader of the month. Having done a 6 months repo trade from Spurs to Liverpool and back, pocketing a handsome 3mio pound(if its true player gets 10% of transfer fee). Nicely done. Is storing crude for 6 months worth that much for the hassle given?