Don't discount the risk before mid Sept.

Following Monday's easing of volatility in petroleum, the market has shown its fragility to potential weather event risk. We know that the seasonal peak is not for a few weeks so there is no discounting the potential for some activity affecting the Gulf of Mexico. Tropical storm Fay has not posed any threat as of now, but don't assume the risk is gone. If Fay fizzles, there could be something around the corner coming into September.

Given the easing volatility in the market (read less buyers than sellers of optionality), now is a good time to buy upside insurance. Asian style crude call options with a $125 strike for the September through December strip were offered today at $5/bbl. For lower premium trades, look to the $135 strike for $2.75.

NY, 530pm, Aug 19