Directionless oil price.

The first thing SFOT saw in his list of commentary is this. " We expect the prices to trade in a wide range $45-$55 in the coming weeks. Weak demand keeps it from rising above $55, weak supply keeps it from falling below $45." A very amateur sounding piece of advise from a typical research analyst whose only knowledge of oil is from the financial view point. Sadly speaking, SFOT agrees with his call, however and dare not go against the mighty strength of the financial flows.
If there is anymore doubt about the failure of commodity investments as a diversification in the portfolio, yesterday should provide as good an answer as there can be. And one need only to look at price action today in equities, EURUSD to pinpoint Crude oil trading up $1. While demand is still weak in the very prompt, SFOT is more than happy to hold on to his putspread. He will also hold his short COM9 35/60 strangle, valued at around 1.50. However, he struggles to understand how middle distillate cracks are still holding up in the very prompt. Perhaps week on week demand is picking up due to a colder than normal temperature this time of the year in the US. Perhaps the weakening flat price in the past few days have induced end users to come out and hedge their exposure. He is tempted to add one more and a last unit to his short in the front end crack but shall wait for further data in the form of API/DOE tomorrow.

Jet implied demand

Distillate implied demand: short term spike or real recovery?

As many readers will know, there will be a series of protest tomorrow in the city of london. SFOT feels like another innocent guy working in a bank being victimised for things he have not created and wealth he did not enjoy over the years. All the grunting is summarized nicely by Macroman. Well said.

Financial markets and quarter end

Oil prices cannot be spared this nasty opening in Europe when every asset classes are down and safe haven currencies being bid (CHF, JPY). Both Brent and WTI are hovering just above 5$50 and the picture does not look healthy. 10 day avergae is broken and next test would be the 20 day moving average. Weekend did not provide any major news SFOT can identify that is oil specific and he shall leave it to the financial markets' havoc and quarter end flows to dictate direction. However, he notes that the fact that the back end has done as much as the front on this correction suggests producer hedging activities and why not so when Z11 WTI was trading above $70 last week.

Maybe its time to revisit this trade of being long Gasoline vs Heating oil. Other than 1 crazy week where middle distillate cracks were extremely strong, SFOT does not see any fundamental reason other than short covering for that to happen. Days cover remains extremely high in middle distillate, a lot of which are diesel stocks while gasoline remains in better shape in terms of days cover. April is the official driving season in the US. While cars sales remains depressed in this environment, retail sales figure shows that pump receipts are looking healthier and this should continue to support gasoline cracks.

Distillate days cover

Gasoline days cover

Troubled airlines industry, Jet Fuel and Quarter end.

As we approach the end of Q1, SFOT takes a look at the coming summer and what might be in store, starting with the Airline industry. Air france announced a loss for this fiscal year and predicts another loss for next year. Europe's biggest airline's results illustrate the tough environment for this industry in the next 2 years and with prices firming from here, no wonder their shares are down 6% this morning. For choice, SFOT will be short Airlines but have not quite made up his mind which industry he would like to be long against airlines, but certainly not financials! He is not about to let his little equity fun take over his main focus though.

What he wants to point out is that airlines as a community are starting hedge their Jet fuel consumption more actively again. This is especially the case for summer based Charter airlines in europe, a phenomenon that happened last year that took the jet forward curve to a shape never seen before. However, a lot of them got into trouble hedging at over $100 per barrel and some never survived past 2008 when margin calls came. Good luck to them this time round. While the forward curve is going a little higher, the front end, which is more physical related is also being bid higher by physical players looking to buy more Jet fuel for storage. And as long as the contango stays here, making it viable to store Jet fuel on floating storage, there may appear to be a decent underlying bid in Jet fuel, but this will not last forever.

Jet vs Gasoil in Europe

That financial players are mainly responsible for prices to rally this past 2 weeks are certainly a foregone conclusion. One look at the simple chart of EUR/USD agsint WTI might even suggest prices to be at least 10% higher and the financial guys would probably be happy to keep length, or at least not add to shorts. End users jumping on the trend can be further deduced by that open interest further out the curve has increased by almost 30% over the month of March. Now that EUR has seen some weakness today, Crude price has indeed followed suit. The end of the quarter may bring no new risk but come next week, or next month, we shall see if the price level here holds. A lot will depend on Equities and the performance of USD but if those do not hold up, we could see a very hard puke in Oil prices. A 50/45 putspread in K9 WTI costs around 1.25 just for a taster.

Middle distillate strength may not last.

Now that DOE data has confirmed SFOT's view, what next? A couple of things worth nothing. First, inventories in Cushing have drawn by 2mio barrels. Yes that is bullish on its own. However, PADD II, which includes Cushing, saw stocks build by 1.2mio bbl, and excluding Cushing will be well over 3mio barrel of build. Now that is not bullish, as refiners are cutting runs, either by way of turnaround season or idling of units. Crude stocks are being put into storage everywhere else. The monkey business of Cushing stocks and WTI prices is just about the time spreads in the front contract, and it is still weak as of this am. Bear in mind run cuts are happening all over the world as we speak.

Secondly, with regards to distillates. The draw was due to run cuts, as well as exports of diesel which has created this increased demand of over 200kb/d week on week. Hearing from physical traders, these are heading to Europe as european cracks have recovered, and are mostly put into storage again. Is that real demand? As bearish as SFOT might think these data is, flat price are going the other way. He is not about to go against the flow again, and is likely to find more ways to play weakening economics. One thing he likes is to be short product strength, i.e crack spreads. Below is a chart on Jun09 crack in european gasoil vs Dec09 Ice gasoil. If refiners start to pump up runs to take advantage of this uptick in crack values, we can be sure the stock levels in middle distillate will swell further from the already high level, and cracks in the prompt should suffer relative to the back. The upper chart is the equivalent in US Heat oil.

It's all making sense

SFOT likes the API data that just came out. Not because this has moved the market in his favour, but because the numbers make sense to him and falls into place his view of the oil market. Crude has build again by 4mio barrel week on week while both Gasoline and Distillate saw inventories drawing 800k and 1.5mio respectively. This smells of run cuts and the resulting numbers shows. Cracks are strong and reflects a short term strength as the market adjust to these numbers. A look at the screen listed 3-2-1 crack spreads illustrate this move the best. If the DOE numbers come out to be anything like the API yesterday, SFOT will look to add to short spreads and short flat price.

US crude run


3-2-1 Crack spread

Inside the barrel, SFOT made a very simple back of the envelope calculation on the economics of storage. It is profitable to store low sulfur fuel oil if you have storage tanks. It is even more profitable to store middle distillates with the contango and floating storage is now in high fashion. The profit could be anything between 2-4 mio usd for 1 vessel worth of storage(average storing capacity of 8-10 cargos). More interestingly, it is even more profitable to store Jet fuel as the contango has been and is still raking in a fortune for those who has storage and has managed to secure long range vessels cheaply. That there has been good demand in Jet fuel or gasoil this past week is not surprising to SFOT as he would also be buying as much material as he could in Jet fuel if his storage space is coming to an end and lock it in for 6 months or so. Once this buying spree is over though, he is not sure where to find the next wave of buying from.

Jet prices and diff to gasoil Europe

p.s - if there is any physical trading related reader, please feel free to correct anything here.

Still not convinced of the rally.

Right, so equities rallied 7% yesterday, well done Obama and co for the ever complicated TALF and TARP plan. The feel good factor has spilled into the commodities market, in particular Oil. Just take a look at the 2 charts below. Comparing 1 week changes in the WTI curve. When funds and 'investors' piled their money into commodities, the back end rallied. This upmove in the past week has the same characteristic. So, my guess work is that macro funds, fast money and possibly even pension funds are putting their money to work in the long end. Of course we cannot rule out end user flows 2-3 years out and SFOT suspect its a combination of these 2 flows now that is creating a $10 rally in the long end of the curve the past week. It seems concensus that commodities market is the perfect place to play the reflation trade, however, with all these money piling in, it is again not real demand driving the market, but money.

With products leading the way, refining margins are looking healthy again. Whether this will induce refiners to start increasing runs is the key question going forward. Stocks in US are still as high as weeks ago, while demand has not picked up a bit. Inventories are similarly high in both Europe and Asia. This short covering rally in cracks may soon come back and haunt the refiners if there is no real demand for the finished goods. SFOT has a small bear position now and holds a tiny put spread in the prompt months as he does not like this rally but could not go against it full on right now. He is also short the prompt vs the back in crude and starting to do the same in middle distillates. He is fully aware this is against the trend and is prepared to reverse the trade when he is convinced this rally has legs.

Short covering or fresh long in oil?

Consolidation has begun at these depressed prices in equities that companies are expanding and the big news this morning has been Suncor's aquisition of Petro-canada. From a non equity view point, this is a signal that oil sands are not a viable replacement for the conventional crude at current price levels and with equitiy prices at such depressed state, cross aquisition makes sense. SFOT reckons this is just the beginning and there will be more consolidation to come in the near future, however, he shall leave it to the gurus in the equity world to indulge in this game.


Back to the oil barrel, the recovery of prices were mostly led by the middle distillate. Cracks have rallied across the curve and SFOT could not see any sudden increase in demand for that part of the barrel and have to put the current movement to short covering and end users in the longer end. The latest CFTC data has confirmed that there has been short covering in WTI over the past week by large traders. Looking at middle distillate specifc, diesel stocks are extremely high globally, jet demand is extremely poor other than demand for storage use in contango play. Asia in particular has been hit hard. It is also the time we exit summer in the northern hemisphere which means demand for heat stocks are at its seasonal lows.

Having said thats, Brent is almosty at the high of the year on a continuous basis, and Gasoil have just broken the 50% fibonacci retracement and catching up fast. Fundamentally SFOT is sceptical about the rally, however, the amount of flows from leveraged community and possible end users cannot be ignored in the energy market.

April WTI expiry day.

Bring on Villareal! SFOT likes the Champions league draw very much and he is looking forward to a visit to the emirates stadium this time.

Back to the energy space. April WTI expires today but SFOT is not a physical trader and shall not look too much into price action in that contract today, however, the spread in the physical market post expiry will post interest to him especially with regards to the front wti spreads. The biggest performer yesterday was Natgas... a 15% rally right after the weekly data shows a bigger than expected draw. SFOT knows little about Natgas in Henry hub but actions like this never cease to amaze him.

The back end of the oil curve is still well supported with strong buying in the middle of the barrel and he is not about to go against what seemed to be invisible hands to him. However, he does not see how this buying can last when inventories are still high and storage is still reported full everywhere. Look at Diesel stocks in the US for example. Inventories are building and the only outlet is Europe but at the moment, european tanks are full as well. China has reversed its diesel importing role from last year this time and has also turned exporters. With swelling stocks in the middle of the barrel and approaching seasonal low demand, SFOT is very tempted to sell middle distillate cracks in the summer period on an outright basis.

In the physical market, China has been trying to sell its excess crude cargos back to the market for a while. Last year this time, they did the same but it was due to turnarounds and refineries were not able to process the crude. However, this time round, it is lower demand for products in China that has led them to turnaround and sell crude back. This, together with the fact that runs are getting cut everywhere, we shall see more crude available in the market. Time spreads in crude shall weaken further. and SFOT shall sell spreads on strength.

Is this the beginning of the Oil squeeze?

Yesterday's DOE stats are as bearish as it can get. Demand lower, Gasoline stocks build massively against expectations. That crude prices are still rallying hard this morning can only be attributed to related rallies in equities, eur/usd and specs. Can we now rally very hard towards $55 in WTI? Yes, only if Eur/Usd and Equities sustain this rally as WTI looks cheap compared to all other asset classes. Now that technicals point to a breakout above the 100-day moving average in the front month WTI, the technical funds, hedgies + retails investors must be salivating at this 'golden opportunity'. SFOT will not go against the trend but he remains very sceptical given that underlying situation is getting worse.


Refining margins are getting hit hard now that crude oil is rallying. The higher crude goes without cracks rallying, the more refiners will cut run and the more crude will be left unsold in the market. This is already starting to look the case as SFOT hears European refineries have cut run by around 15% so far and is prepared for more. The front month spread in Brent is the widest for a while and only confirms that there are a lot of crude that can't be sold.

Brent Refining margin

The way the curve has been behaving, it seems a lot of end user type flows are in the market or it could also be specs buying the back end. Whatever the case, it now seems that we might have come to a time where volatility in the prompter months are 'cheap' to own. SFOT does not think this rally is sustainable as the FED has done what ECB did to Oil back in last summer and it could come back and hurt them harder.

SFOT has been caught under the weather these 2 days and shall endeavour to return to action tomorrow. In the mean time, he is ecstatic about the way Arsenal came back from behind against Hull and now looks forward to a trip to Wembley next month.

Master plan of OPEC

The important oil news over the weekend is clearly the decison by OPEC not to cut output further, but to increase compliance. This in effect is a cut on its own, though a small one. SFOT does not like to comment too much on these stuff and prefers to leave it to more seasoned OPEC watchers. However, a few little points worth noting. 1) The official communication does not seem to be as urgent as the past few ones in which they fear further price collapse. In fact, that prices in both prompt and deferred has been stabilizing, and that time spreads are strengthening seems to have made them a little more comfortable at this point. 2) That Saudis still run OPEC. They only broke their silence last tuesday re what they like out of the meeting and the outcome was as such. In any case, SFOT believes what OPEC has done is essentially to put a floor to the price of oil. Floating storage will continue to clear itself and the supply demand balance will not look as ugly in a few month's time, unless of course we go a lot deeper in this recession/depression. Flat price will not rally by a huge amount, however, which will be key for demand going forward.

Back to the barrel, a small rally in product cracks proofed short lived, as distillate cracks continue to weaken from its midweek high. There seems to be there are some end users hedging their consumption 2-3 year out hence giving it some sort of strength. However, the supply dynamics still look ugly. After a draw through Feb(probably due to colder winter), heat oil stocks in Europe are now building up again. The worst of the bunch is JET oil in Europe where stocks are at multi-year highs. Jet prices are now weakest for a long time, relative to crude. Air passenger traffic is still on the slide and will get worse. However, gasoline cracks remains strong. After a brief pullback, SFOT reckons Gasoline is going to get even stronger relative to the middle of the barrel going into the driving season.

Opec, DOE and diesel.

Yesterday's DOE release gave 2 new insights. 1) Crude stocks are no longer building at the pace seen over the past weeks, though stock levels are still very high compared to past few years. 2) The overhang is spreading to combined products, most notably middle distillates. Given that we are now seeing a good trend of Stock draw in crude, SFOT suspects that refining margins will start to drop off in the coing months. Demand will probably now hit distillates(diesel/jet/heating oil) more than the residuals and Crude. Opec meets this weekend and IEA+ OPEC's own supply/demand study is due tomorrow, it should make for an interesting lead up into the weekend.
Relative value wise, it is now clear that Gasoline dynamics are the least worst off compared to any part of the barrel, while dd/ss in distillates remains very bearish. Reported stocks in Europe and US are extremely high in that part of the barrel, and is not likely to recover anytime soon. SFOT is even more convinced of being long gasoline crack vs distillate crack on any weakness, and have added one more unit of this trade post data yesterday. Within middle distillates though, SFOT finds a little peculiarity with the behaviour of Diesel. Diesel inventories have been building up a lot in the US, which is probably normal this time of the year, barring last year when China was importing tonnes and the world was short diesel. Demand this year has been extremely poor in diesel, and the combination should see diesel weaken a lot. However, comparing Diesel and Jet, it is Jet that has suffered the most in that part of the barrel and they are trading almost flat to each other now in spot price. SFOT shall endeavour to dig more into this relationship.

In the mean time, Well done to english teams, and congratulations arsenal for finally having a small bit of luck they have gone without for a long time. SFOT hopes for a good draw for the 1/4 finals.... Porto perhaps?

SFOT has the luxury of being off tomorrow and will be back in action on Monday. Good luck.

Gasoline take a breather

Surprising numbers in the API release yesterday, for a change at least. Gasoline building by 1.65mio bbl and distillate turned into a small seasonal draw. Little wonder Gasoline cracks have come off recent highs. However, supply side is one thing. Out of the whole barrel, days cover looks the least worse in Gasoline, especially into the driving season. SFOT is now tempted to use this dip to buy into gasoline vs heat/gasoil crack if demand numbers today does not turn out to be bad.

WTI-Brent spread in the front months have come off a fair bit since the high yesterday. Whatever has driven this spread seems to have cooled off for now but clearly the wild movement is only concentrated in the very prompt month while the back end of the curve have hardly moved. The reason is probably attributed to stops, techical upside triggers, and then more stops. Some researchers argue driving season now should see WTI, the sweet grade favoured over the others as they have a higher gasoline yield. That is a very valid reason, but why now? We have seen that gasoline yield is already picking up over the past month or so and that cracks were going a lot higher when WTI was still significantly under Brent. Moral of the story is, prompt WTI-Brent is hardly fundamentals anymore.

Good luck to the Arsenal vs Roma. Well, i thought there will be one english team which will not make the top 4 and i made it clear who i hope it will be. Lets hope Mourinho has something up his sleeve tonight and that Walcott + Eduardo repays all the faith we have kept with them while they were out.

Messy crude price action and the return leg of UCL

Crude oil prices have settled down a little today, after 2 days of brutal moves in a single WTI April 09 contract. While SFOT hears nothing to suggest any fundamental reason to be aggressively buying J9 WTI, the fact that every spread traders would like to be short JK spread is likely to point to stop losses in the spread and possibly more to come if we break higher on the one spread which is completely disconnected to the rest of the market. Evidence still suggest stocks in cushing remains high however, and a recent 1mio bbl draw in cushing cannot explain a usd $4 rally in a small time spread. The randomness of the front WTI future is even more pronounced when we compare it to Brent. The past few days have seen Brent futures, which is a more global crude than WTI, trade like it is going out of fashion. The low realized vol in Brent has made being short the strangle in M9 Brent pay off these past trading days and SFOT continues to hold on to the strangle.

Coming up to the Opec meeting this weekend, the fact that Saudis would like to see more compliance before discussing more cuts are definitely sending a signal to the market that production cut is far from a done deal. It seems they now have a massive problem of balancing fast falling demand and crude prices they would like to see. However, they must draw relief from the fact that floating storage are in the process of clearing out, while front line crude prices have been stabilizing. Without further news nor fresh intelligence, SFOT now thinks they will not make new production cut but employ a wait and see attitude.(shift of views from just 2 weeks ago). I guess this would mean flat price in Brent to stay within range post OPEC meeting next week while prompt WTI futures will go about its own monkey business.

The champions league continues tonight.... my money is on at least 1 english team to be knocked out this week.....and the only team NOT with an advantage heading into the second leg is of course Man Utd. Playing Italian teams away though has never been easy and Chelsea+Arsenal are in danger as well. Liverpool's seaon might end this week if they do not qualify today and then beat Man Utd at old trafford. Whatever it is, SFOT is ready for lots of football this week while crude(brent) prices falls asleep.

Dislocation in April WTI?

This market never fails to amaze. SFOT had chosen to take a cheeky short break to Amsterdam, but just 2 days away from the market and he is left puffing on his day 1 back. Yes equities are feeling nervy, gold has done some $20 back and forth, GBP has taken a bath, but nothing surprised me more than the sheer performance of the front month WTI contract. Not that it matters that this thing has moved $5 in 2 days. The fact that the entire WTI curve is now trading at a substantial premium to Brent is bizarre, given the well documented stocks in storage in Cushing. What is even more interesting is that we are deep in the fund roll period, which means WTI front month should normally come under pressure, like the past few months. However, the JK09 WTI spread seems particularly resilient. One wonders what the spread might be now if the funds are not doing their rolls this month. It could be stop loss, profit taking from Gasoline crack, CTA entry point for technical spread traders. Whatever it is, SFOT will unlikely get involve in this major move until he gathers what happened. Another major move is in middle distillate cracks, where front crack in Europe has ralied $2 in 2 days. Suspicions of profit taking for this move up is probably a safe answer at this point.

OPEC meeting gather pace and the latest seems to be a couple of headlines on reuters that Saudi may push for only compliance, not more cuts. Whether that is the case or not remains to be seen but with prices seemingly to have found a bottom, they may well decide this way and leave options open for the next meeting.

Crude strength harming margins.

A rather bearish set of DOE stats yesterday, in particular distillates. Although the tail end of the season, distillate stocks normally gets drawn down these few weeks but the past 2 weeks have seen massive build and does not bode well for distillate cracks. What is even more interesting is that input to refineries are starting to increase, and this is on the back of really high prompt Gasoline cracks. Refineries are tweaking their output to be max gasoline and less distillates. However, it is unlikely to ease the swelling distillate stocks amid waning demand.

As for Gasoline, yesterday's number strengthened the case that demand is picking up at this low prices and although truck miles in January were very low, it will not stop Mr and Mrs Smith taking their car out for a long drive across the west coast vs taking American airlines.

The strength in prompt crude oil is now beginning to have very big impact on refining margins. With Fuel cracks and gasoil cracks losing over $3/bbl in the prompt, light end cracks strong but not astronomical, refining margins globally are coming off hard. At this stage, it may be hard to see flat price or structure making new highs. SFOT has taken off a chunk of his length in Z9 Brent and also Brent spreads M9Z9 yesterday. The fund rolls continue today and peaks tomorrow when the major USO and GSCI roll kicks in. and SFOT is surprised that J9K9 WTI spread is not weaker than it is currently @-1.80. One wonder what lies ahead for the remaining life of the J9 WTI contract.

HOPE for Arsenal as Aston villa cracks under pressure. We may yet get lucky for the 4th spot this year?

Crude oil structure strengthening.

Overnight release of the API figures shows a continuing pattern of crude+gasoline drawing while distillates are building massively. If this pattern is to continue in the DOE release later today, we will see a big gasoline induced rally and spreads in crude oil to firm even more. Distillate cracks will continue to be sold into. The next few trading days will see the fund rolls in full swing and the volatility in the front spread will no doubt be the highlight.
While the WTI spread is interesting for the next few days, the strength in Brent spreads in the northsea has been strengthening steadily and looks to have picked up some momentum. The very prompt spreads, called CFDs(contract for difference) in the physical trading world, are in backwardation and this reflects the potential tightness building up in Brent related crude(which is everything east of the atlantic!). In the futures market, a simple back of the envelope calculation shows that with Brent spreads now trading only -0.80, the economics of floating storage is no longer viable for cash and carry, thus floating stocks are now offloading fast. This is self fulfilling as when stocks are drawn down, the structure will strengthen and in turn cause more stocks to be drawn. SFOT does not think this will be in full swing yet but in the past, these swings do happen very quickly when it does.


Given the last few days' volatility in the equities world, prompter volatility in WTI have also picked up. SFOT will use this to sell into the 35/60 stangle in COM9, achieving just under $3 of premium. A brave one which may induce some sleepless nights and possible nasty MTM admittedly.




Finally! Arsenal scores in the league. And Bendtner as well. A relief and a faint hope of champions league next season. For all of his heroics or luck last night, i hope we do not have to depend on Bendtner getting goals for much longer. Champions league or not next year, it pains SFOT to see this team becoming somewhat of a fringe side in the league this season and a serious overhall is needed to challenge for anything next year. That said, Come on Man city!(playing villa tonight)

Risk assets and oil.

In the meltdown yesterday, SFOT finds 2 moves of interest within commodities and fx. 1) The fact that Gold has not been the safe haven asset over the past 3 trading days strikes me as that it is not going to push above $1000 this round amongst whisper of cash needed for margins and also india demand for gold has fallen out of bed. 2) Safe haven currencies CHF,JPY are not strengthening a lot in this environment vs commodity currencies, AUD, CAD. With this in mind, SFOT is likely to favour buying the pair AUDCHF with a fairly tight stop below 0.73. Also, Gold is probably not a buy now and he shall wait for the trend to turn before taking the dive.

Back to the oil complex, Brent crude recovered from its low of yesterday. With Opec meeting drawing near and the latest headline from Nigeria on explosion of a shell pipeline reminding us of the risk, SFOT will add another unit length to the slightly deferred price, and keeps his long spreads position in Brent. Gasoline cracks continue to hold firm and as we head into another DOE day tomorrow, SFOT notice that the sweet sour differential has widened out again towards $3. SFOT also hears that the east-west arbitrage for Fuel oil is now closed, hence fuel oil cracks should be under slight pressure.

Finding strength in overall weakness.

Black Monday theme today as of london lunchtime. Was the market prepared for this? I am not sure but looking around at the mood of colleagues and a round of chats, phonecalls and emails later seems to point to a mix of yes and no. Whatever the case, there is a downbeat mood everywhere and one wonders how many bulls are finally throwing in the towel. There seems to be many articles about this is the bottom or it is close, but is it really? SFOT doubts it, and has decided to bite the bullet on his little equity exposure.
Back to oil and commodities, SFOT is not bothered by a $2 drop in the Brent contracts. The price is still comfortably contained within the $35/60 range and he still carries his Brent Z9 length. The fact that M9/Z9 Brent is stronger on a weak flat price environment carries a stronger message about the underlying strength of the market. CFTC data this week on WTI shows that large traders reduced the net length and open interest has dwindled. This would be consistent with flat price showing a touch of softness and also some funds reducing exposure as it would be month end last week.

As readers might remember SFOT has been bullish car petrol over Jet in this trend of falling demand. It has been well documented in the US but in europe, it is also interesting in terms of Jet vs Diesel. It is a similar story over in europe that Jet demand has fallen over faster than one could imagine and stocks are piling up, while Diesel is still in demand. SFOT is sure seasoned traders in the energy space would no doubt have this long some time ago, but with a convergence play in place now, it is indeed tempting to be short of european jet on the forward curve against european diesel.

Jet stocks ARA
Jet over diesel Price ARA

SFOT hears there is a heavy snow storm in New York right now and experts have pointed out to him that whenever that happens, prices tend to be firm. This doesn't seem to be the case in terms of flat price but certainly Heat crack has strengthen from its Friday close. Another classic case of trading structure rather than flat price for fundamental views.