Refining margins, product spreads and Champions league.

CFTC data this week paints a very dull picture overall, except that large trader have covered some shorts and gone a little longer in futures but have reduced net length when combined with options. SFOT is happy to be long of Z9 Brent futures still but finds it hard to add to this length at this juncture. While fuel oil has given back a little of the gains, gasoil continues to lose its value in crack terms. This is causing refining margins to weaken quite a bit from its peak this year.


One interesting thing he notes is that ARA gasoil stocks are being drawn down for the past 3 weeks. He does not know whether the storgage is making space for other oil like Jet or diesel or whether the economics are not working anymore but he suspects this is not a short term phenomenon and is exploring the risk-reward in buying some timespreads on the gasoil curve, i.e M9Z9 spread.




Given that Asia weakness is bound to continue and inventories over in Singapore for example are still at a fairly high level, it may also be tempting for those who can to be long of European gasoil vs Asia via the East/west spread. (SFOT notes this is also a function of freight and many other factors, hence will not be doing this himself). Well now, let the week unfold and see what financial havoc may bring to our energy space.




Finally, SFOT is saddened by Arsenal's failure to score in 3 straight games and chances of being in champions league next year now looks slim. However, he has a game against roma to to look forward to and is impressed by Asharvin's display this weekend. One can only hope the season will turnaround. Game of the week, Inter vs Man Utd or Real Madrid vs Liverpool. I'm a buyer of Inter(as SFOT cannot dislike Man Utd more than anything) and Real Madrid.