Crude and gasoline builds

Statistics revealed gasoline demand destruction and significant crude inventory builds. However, crude did not decline as much as expected. Consumer hedgers for diesel and jet fuel are starting to buy upside insurance now for 2009, which has given support to heating oil markets. Gasoline demand has forced the RB cracks to the negative territory, creating opportunities to buy cracks for 2009 at very depressed levels.

With volatility remaining at very high levels, using spreads (collars) or 3-way structures is very attractive. A November through December 95-105 call spread (Asian) is zero cost selling a 77 put. This hedge would be good for those that are holding low or no inventory against short sales for Nov and Dec.