One thing the DOE numbers have moved is the continued strength of Gasoline vs middle of the barrel distillates. This spread in N9 contract on Nymex is now printing new highs, and with days cover in distillate still moving higher and heading into peak driving season in US, we have yet to see the highs in this spread just yet. SFOT still keeps a unit of this on as physical demand from Africa and the Hurricane season approaching will continue to support Gasoline.
Looking at the bottom of the barrel, in heavy fuel oil, SFOT is aware that bunker fuel demand is still relatively high, especially from Asia. In this run up in oil prices, Fuel oil has remained very strong, whereas bottom of the barrel was very much unwanted in the run up to $147 in CL1. If we do see a drop back towards $50 or below, then fuel cracks will continue to inch higher, possibly having a crack at positive level(pun not intended)? This is also consistent with the fact that sour crude has been extremely strong, due to OPEC cutting sour crude supply, limiting heavy fuel oil production.
Today sees the expiry of Brent M9 contract on ICE, and the performance since the open has been amazing. Whatever the reason is, the recent strength in time spreads in the prompt months has given incentives for some of the floating storage North sea oil to be sold. We shall see if there are decent buyers. SFOT does not think the strength in spread will last, however if proven wrong, the strengthening structure will in time provide a base for the market to rally back towards $70. Not just yet, unless SPX shoot way above 1000.
Anyone any interest to take a cruise in Somali? Im sure this will interest all......
http://247wallst.com/2009/05/14/if-oil-demand-is-falling-why-are-prices-going-up
ReplyDeleteJackpot!!!
ReplyDeleteunwound the flies on the 58.5 mark.. for about 450% IRR..