Inventory Reaction and Sing Jetkero Hedging

Energy markets held firm in the face of bearish inventory data yesterday as crude stocks in the United States were reported to have reached levels not seen since 1993. WTI and Brent both softened on the day but support remains fixed at the $50level. In short, the longer the market can remain above this price point, the weaker any retracement below it should prove to be. The reported draw in Distillates can be traced to an increase in demand from continental Europe, but so long as crude is able to hold above $50, expect Products markets to remain firm as well. As expected, California Jet Fuel experienced a late day rally and so
Distillate traders in Singapore should be on guard for any type of follow-through.

Implied volatility softened slightly in the Products yesterday as the market appears to be range bound and unable to break out firmly to either the upside or downside. Hedgers with near-term exposure to further upside moves in Sing Jetkero can look to lock in protection in the form of the April-Sept09 $70/90 call spread for only $3.00/barrel. The premium required for the call spread can be cut in half by accepting a price floor (short put) at $53.00.

Singapore, 09:00