The story of the day was the major reversal in the March April WTI spread, contracting to $4.40 from $8.00. The fund rolls have most likely been completed which may decrease the pressure on March selling. Furthermore, the spread to Brent seem to have been extreme and refiners with the ability to buy at Cushing would clearly do so before forcing lifting out of Rotterdam for inferior quality barrels.
There is a high likelihood that the April contact will follow suit. Long crude strategies may be better placed in May or farther out on the curve to mitigate the risk of further contango, when front futures contracts are lower than longer dated contracts. The May $50 call is now worth $2.75. A call spread of $50-60 in May would cost $2/bbl, which would be a good low cost strategy to protect against unforseen rallies.
Some Hudson Capital Energy will be available in London during International Petroleum Week. Please contact us to set up a meeting at your convenience.
cthorpe@hudsoncapitalgroup.com
hsheng@hudsoncapitalgroup.com
jkornafel@hudsoncapitalgroup.com
Friday, February 13, 2009
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