Dipping Into Equities And Forex

Despite this recent weakness in crude prices, refining margins for oil remains strong. Heavy fuel oil and light ends (naphtha, gasoline) remains the key support while middle distillate continues to weaken. Given this theme seems likely to continue for the near term, SFOT likes dipping into the equity world and get long of BP (BP) or Exxon (XOM) with this pullback.

Otherwise the very much criticized front months WTI contract are beginning to look interesting on the long side. This is a beast we all agree and a very badly managed one by the exchange given how much open interest is held by indexed funds. However, with the rolls out of the way and a good volume of remaining lengths would probably like to take delivery of the crude for storage, it is interesting to see how much higher the Mar/Apr spreads will go. Judging by what happened in the last expiry, SFOT is tempted to dip his toe into being long this spread on any dip for a very short term punt/gamble/trade, or call it whatever you like.

One thing of interest lately has been the baltic dry index. As an aside, SFOT likes to be short the EUR as he views Europe as the weakest link compared to the US and even UK in terms of recovery and potential breakup, threats of protectionism etc. However, if Baltic dry index is truely recovering, being short the Eur against the AUD might begin to look interesting.

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