US distillate inventories are reducing as expected during the winter - though levels remain far above prior years.

Source: US Energy Information Agency, http://tonto.eia.doe.gov/dnav/pet/hist/wdistus1w.htm

Consumer Hedge Tear Sheet: 27 Jan 2010

Consumer Hedge Tear Sheet: 19 Jan 2010

Consumer Hedge Tear Sheet: Dec 17

Consumer Hedge Tear Sheet: Dec 10

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Consumer Hedge Tear Sheet: Nov 23

Trader's Commentary

While demand remains lackluster downstream, crude markets remain firm around the $80 mark despite rising inventories in WTI. Implied volatility has dropped in line. Recall there is incentive to increase inventories in Oklahoma for year end tax purposes, so beware the builds in Cushing. Physical markets in refined products have not been helped by warmer weather and a slow economic recovery. It is also notable that NG suffered a 27 cent down day based on reversing weather calls from yesterday.

Heating oil traders and suppliers taking on inventory with low demand may look to hedge with collars or put spreads in this market. The Dec-March calendar heating oil swap is priced at $2.12 per gallon.

180 – 200 put spread is now 6 cents or sell the 230 call.

Zero cost collar (hedger buys put) is 200 put versus 220 call.

Please call for further detail.