Wednesday’s bullish momentum in the energy complex was dealt a short-term blow yesterday by surprisingly large US inventory builds in both crude and products. WTI March/April contango pushed back out towards -$3.00 but has recovered in early Asian trading to around -$2.40. The near-term contango futures curve remains completely beholden to the excess inventory levels in Cushing, Oklahoma. Until demand can consume this surplus, any recovery in the contango structure will be short-lived.
After two major spikes higher in January, Sing JetKero looks to be testing support on the downside. The March ’09 contract can possibly form a double-bottom if support remains strong around the current $55.50 level. If so, look for a quick recovery across the Cal09 swap, making now an excellent time for consumers to use 3-way option structures to maintain unlimited upside protection with limited downside risk. Indications: The Sing JetKero March-December09 $80 call strip can be purchased for Zero Cost by selling the $42/57 put spread strip in the same tenor. This hedge allows for unlimited upside protection above $80 in every month from March through December in 2009. On the downside, risk is limited to only $15 through the use of a put spread strip (instead of the traditional costless collar structure where a naked put strip is sold to finance the call purchase).
Singapore, 09:00
Thursday, January 22, 2009
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