Take advantage of easing volatility

New York, 5pm Thursday Aug 7, 2008

The market tested lows below $118 today but rejected a breakdown, ending up over $120. Technical analysis pointed to reversals in most products and volatility was being reduced by traders. We expect to see stronger RB cracks in the coming days while heat cracks have likely seen the majority of their sell off. However, we are not taking any positive bias yet with the heat crack.

This market favors buying options coming into the weekend. Fridays often provide buying opportunities as traders reduce positions fearing the cost of decay. Those looking to take a long position should look at the well offered September American $130 call offered 60 cents/bbl. This only has 1 week to expiry but provides insurance against an Olympics "event". Furthermore, we are in hurricane season now and the next two weeks may provide some interesting data. For those hedging hurricane risk, buy RB calls. A September $3.20/gal RB call is offered at $0.065/gal, providing good insurance in the event of refinery issues.

The Olympics provide an odd sense of peace in the world for the moment. Bush will be in attendance with some 70 other heads of state in Beijing.