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