Short Term Overshoot In WTI On The Cards, While Airlines’ Woes Continue

So, a certain analyst changed his oil price forecast for the year, stopping out of his short and calling for higher year end prices, WTI rallies, mid term calls rallies 3 vol points. Sounds like groundhog day to anyone trading WTI in 2008? Well well. SFOT has seen this many times, and if anything is to go by, today’s weakness due to producer hedging will only be short lived, as speculators will indeed buy into the story, especially now that inflation them is gathering steam. No, SFOT has not turned bullish on WTI enough to bet the house on it. Rather he sees flow driven speculation into the oil market, one of very weak fundamental still at this point in time.

A very good example is in distillates, where time spreads was under pressure again and cracks lost almost $1 into the close yesterday and this morning. Reports of more supertankers being hired to store distillate is circling the market, and inventories on water are just swelling. Still happy to sit on short distillate cracks and time spreads. As for the Jet fuel space and equity guys looking at airlines, more bad news on that front. Finnair said turnover has dropped 15% since start of the year and Kenya air has full year loss of $72mio due to fuel hedging. The challenge facing these guys are tough, and with prices almost doubling from lows of the year, the case is not being helped. Jet differential has come of a little from its recent high and SFOT will remain short of this.

The event of yesterday was a ding-dong GBP around lunch time in london yesterday on rumours of Brown resigning/not resigning. That labour party is seemingly falling apart with yet another resignation this morning. The GBP is a difficult thing to trade now, but major correction underway could also undermine the EUR vs USD for the short term, and could entice players to trade WTI around this pair. It is treacherous territory now, especially for intraday. Good luck and good weekend.

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