Just as predicted, fund buying returned to the market yesterday and resumed the push to $70 in Brent and WTI benchmark crude. Support held firm around the $65.50 area and paper length saw Wednesday for what it was: an excellent buying opportunity, pushing July WTI to a 2009 high of $69.60. It didn’t hurt that GS yesterday introduced a newly minted bullish stance, both near- and long-term.
US unemployment data is due for release later today, and any surprise to the upside (read: not terrible news) should result in fresh paper buying. Psychological resistance will weed out some of the weak longs around $70, and a push above should bring us to the real ceiling around $71.85. Lastly, expect the typical Friday flattening up of short positions (as if we needed another reason unrelated to fundamentals to push higher).
Despite yesterday’s rally, implied volatility levels remain at Wednesday’s relatively inflated heights. Strong producer/hedger buying in the puts has resulted in the much talked about put skew- allowing for advantageous consumer collar buying. Traders looking for a near-term break above $70 can opt for the ICE Brent APO July09 $75 Call for zero cost by selling two $61 puts in the same tenor.
Singapore
Thursday, June 4, 2009
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