Energy markets traded slightly higher on very light liquidity yesterday. Benchmark contracts continue to mirror equities as crude futures rallied on the back of a late-day push higher in the DJIA. Fundamentals, including crude stocks at 20-year highs appear powerless to pull the market lower while equities hold onto gains from last month. WTI contango did narrow, as December 2009 traded almost $1.00 closer to the front-month June contract. So long as the benchmark WTI contract trades around $50, expect congested market conditions for the major products. Support remains firm around $48 in June09.
Prompt California Jet fuel prices moved staunchly higher yesterday as sellers raised offers alongside the crude rally. Expect a slow rally in prices during the second half of 2009 due to production cuts, with consolidating action for the next several months. Singapore Jetkero buyers can protect against a rise in prices later this year by purchasing a July through Dec09 price ceiling at $75. This call option can be owned for free by accepting a price floor (short put) at $55. This type of collar hedge typically requires less margin than simply buying swaps with the added benefit of less-painful daily mark-to-market swings.
Singapore, 09:00
Thursday, April 23, 2009
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