The strength of Gasoline and time spreads.

An ultra bullish set of API numbers overnight set the tone for CLN7 maintaining above $60 as well as another strong day for RBOB crack spread. The latest draw in crude oil would be confirmed by DOE today(according to estimates), which could signal we have seen the peak in inventories in crude oil. Does the narrowing contango in both land locked WTI and waterborned Brent makes sense now? While widely available data seems to tell us that spreads should narrow, however, a bloomberg article yesterday came to my attention re increased import on commodities by China and India, causing the Baltic dry to hit a 7 month high. For sure, the index does not lie, and that the 2 countries have increased imports over the past few months. However, underlying demand still remains weak. The imports were not due to consumption but are meant for storage. In fact, the world is now short of storage space, and what could be better than China and India opening up their country for these excess oil to find a home. Perhaps we have also seen the low in time spreads and SFOT shall think about stopping himself on his short spread position with conviction.

Gasoline is strong, and will remain so, perhaps a pullback is due but SFOT will buy into any dips. Readers will know he has been long Rbob against Heating oil in July, and soon those will become the front month contracts. Over the past few months, with weak middle distillate timespreads, the available storages, particularly in europe has been clearing its stocks for storing gasoil, jet or diesel. This leaves global inventories of Gasoline lower than what would have been ideal. If storage continues to be filled to the brim, then refineries will have to cut runs, as they still have to produce around 30% of middle distillates which cannot be sold. This will not help Gasoline, and as we approach the peak summer driving season, SFOT cannot help but wonder if we can put a lid on how high Gasoline cracks can go.

And finally, SFOT hopes the chaps asking for Arsene Wenger's head to stop. Crisis as it seems, we do have several players coming back from injuries for next season, and we should leave him to buy a top defender and a strong holding midfield. In case he fails to do so and we fail in our quest again next year, we can judge him then. SFOT is as frustrated as any Arsenal fan out there, but whats one more year after waiting 4 years. Perhaps we can make this an ultimatum?