Tuesday’s largely ignored API build in WTI proved to be spot on as the Department of Energy released similar data yesterday. The 7.2M barrel build at Cushing Oklahoma served to increase the contango yet again. Refined products saw relatively bullish data resulting in an increase in cracks. Despite the large feedstock build, the western benchmarks of WTI and Brent showed modest gains as the market remains focused on Opec’s continued supply cuts.
Sing Jetkero swaps followed WTI’s lead with a lack of any sharp movement yesterday. The consolidation we’ve seen over the last few weeks has brought a weakening of implied volatility, yet option premiums remain elevated if examined in a historical context. Distillate consumers looking to hedge their upside risk while collecting premiums can take advantage of a trade that pays cash while the market consolidates, drifts somewhat lower, or rallies. Using Sing Jetkero Average Price Options, the hedge pays out an average of $300,000 per 30,000 barrels of Sing Jetkero per month at or above the current calendar swap price of about $65. Below $65, the payout begins to decrease until it reaches zero at an average price of $55. Below this point, the trade incurs losses. To learn more about this hedge using Sing Jetkero or Sing Fuel Oil 180, contact us at the info below.
Singapore, 09:00
Wednesday, February 4, 2009
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