Rumble in WTI time spreads

The move in timespreads in crude has been the major talking point. What looked like a healthy correction initially quickly turned into a terrible stoploss situation for market participants. Trading spreads in the past week had a reminiscence of late 2008/early 2009. The rebound proved equally dramatic yesterday and the volatility of these spreads are creating a havoc situation for SFOT and his counterparts relying on the crude curve to hedge multiple exposures. However, SFOT is watching this with a curious thought. Is this the opening to get into the big backwardation trade a major US bank is suggesting?


CLM0/CLZ0 spread

Doe figures contradicts API numbers , suggesting stocks drawing in crude, gasoline while building in distillates. We are into the traditional driving season, it is heating oil that has outperformed gasoline until recently. Perhaps it was another theme of too fast too furious but with continued draws forecasted in gasoline stocks, coupled with refinery shutdowns across the board due to maintenance, days cover has improved dramatically in US gasoline. Perhaps it is an increasingly good idea to buy into August Gasoline crack (XBq0 vs CLq0). For those trendy traders, beautiful trend line isn't it?

US Gasoline days cover

US Rbob crack Aug10

Record volume in CL in the past few days has definitely been the case of new financial money piling into this 'asset class'. While the earning season has seen a great start by UBS, JPMorgan, UPS etc and very good US + China data signalling recovery is full steam ahead, SFOT cannot help but think this move in CL has gone too fast. Failing to break the high in CLM0 might see a double top correction towards 80, very quickly. A cheap short term downside play is certainly worth a shot.