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.