Energy markets continue to push higher as front-month June WTI convincingly broke through $56 yesterday. The July contract which is also heavily traded remains $1.20 over June and thus only about $2.50 from the $60 level (thus representing only about a 1.5 daily standard deviation move). A smaller than expected EIA inventory report proved the final spark as equity markets continue to rally and the US dollar persists in weakening.
Refined products also took part in yesterday’s rally with distillate crack spreads softening somewhat. Gasoline prices have shown strength recently as demand for the product has shown signs of life. Consumers appear to have been taking advantage of lower prices at the pump to do more driving. Questions remain as to what extend the H1N1 flu strain will damage the already staggering airline and travel industry.
Singapore Jetkero prices have steadily regained ground in the past week on the back of strong rallies in crude markets. The June contract has broken through resistance around $63 and looks to turn the ceiling at $65 into a new support level. One bright spot in the rally is that option premiums continue to soften, allowing consumer hedgers the opportunity to lock-in current prices before panic sets in due to further price rises. The 2H09 Sing Jetkero $75 price ceiling can be owned for only $2,000/1000 barrels when the $50/60 put spread is sold in the same tenor. Selling the put spread essentially cuts the call price in half and allows for a limited and known possible loss on the downside.
Singapore 09:00
Wednesday, May 6, 2009
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