Friday 3 April 2009

Uninspiring

Already a choppy trading day in Crude oil this london morning, with very low volumes. It looks again today will be dominated by the weight of the financial markets. More fresh money, more sell side analysts calling for the bottom of oil prices and indeed we shall go higher. If there is anymore doubt to physical dynamics still looking poor, one only need to look at spreads of prompt vs 6 months out, in Crude oil and European heating oil. In the run up over the past 2 days, these spreads have done little, and in the case of heating oil, actually weakened. Perhaps it has to do with weekly stocks in europe showing a week on week build. This would suggest that the recent strength has been due to physical traders looking for stocks to put into storage, making full use of this contango. And now cracks are giving back its strength, slowly. SFOT will be riding on his trade of shorting Heating oil spreads vs Crude spreads here a little bit longer. However, he is struggling to find many new trades to put on at this moment but wait for better opportunities in this choppy intraday environment. Put aside non farm payroll and unemployment rate, we shall be having a fun ride into the last friday afternoon of trading. Will we end the week close to 55 or 50, or even below 50 in either WTI or Brent?

Well, premier league football resumes this weekend, which is probably the highlight of the weekend now. Let's see Liverpool take more points off Man Tud?

Brent Jun/Dec09 spread
Gasoil europe Jun/Dec09 spread
Gasoil/Crude box trade
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2 comments:

  1. ry3 April 2009 at 22:41

    Very nice bounce on the crude.. i been short crude from the 53's with the 53/45.5 put spread but have recently sold the 42.5/38 put spread when we pulled down to the 47s. It looks easy enough to cover the 42.5/38 short put for a few pennies and hang on to the 53/45.5.

    I am new to trading crude, but have been trading equity/index fut options for a very long time. Perhaps 2 weeks is enough for oil to settle under 50.. fingers crossed as this mad rush to risk is certainly helping the bull case on oil.

    I have a question on why Nat Gas isn't seeing the inflows you would on crude. What could be the reason for this type of divergence if "fast money" is associated with the major move in crude? Could it be the low % weightage of natgas compared to crude oil in indices lke GSCI?

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  2. SFOT6 April 2009 at 10:38

    Yes indeed natgas is only under 5% dollar value in GSCI for example while Crude is almost 50%.

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