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FxWirePro: Crude options trade perspectives - Abstain from worrying about a drop in the bucket, hedge hot potato ahead of EIA’s crude inventory check

Crude prices have been slightly edgy despite today’s rallies as the Chinese crude imports skidded to their lowest level in a year, although traders mentioned the overall market remains well braced because of OPEC-led supply cuts.

The reduction in the global oil inventory surplus has been driven by the cut to OPEC–NOPEC production in 2017. This joint effort by OPEC and participating non-OPEC members helped bring stocks levels back towards the 5-year average and is largely responsible for this price strength.

Ahead of today’s EIA’s inventory report that is scheduled to be announced during the US session, we advocate initiating longs in NYMEX WTI June 2018 vs June 2019 WTI time spreads (June 2018 vs June 2019) to strengthen on the back of refinery gains and tightening crude markets.

WTI structure will strengthen on tighter balances worldwide. Once again as mentioned in our previous tactical trade idea, we are noticing stabilization in crude production per completed wells in the US and we also see increased demand next year to absorb more US domestic crude. Additional pipeline capacity should also help strengthen these spreads. -Go long the June 18 vs June 2019 WTI time spread at $2.9/bbl on 3 November. Target: $3.77/bbl. Stop loss: $2.32/bbl.

Stay short Jan18 Put option and go long Dec17 Call for NYMEX heating oil contract Distillates inventories in the US are just shy of 5-year average. With demand expected to be driven by strong US growth, post-hurricane led recovery and potentially winter demand picking up, we think there is eventually more upside to heating oil but given the vagaries of the weather, we would express our view via option based strategy.  - We stay short Jan’18 NYMEX heating oil put $1.67/gal (premium of ¢2.71) and go long a Dec’17 NYMEX heating oil call $1.85/gal.

Stay long the December 2018 Brent $65/bbl call, short the December 2018 Brent $45/bbl put Crude markets look set to tighten in the coming quarters. We view the belly of the Brent curve as too cheap and as inventories draw down, backwardation should increase further along the curve. We stay the long the December 2018 Brent $65/bbl call, short the December 2018 Brent $45/bbl put. Courtesy: JPM

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2017-11-23 11:36:21
0m

November 23 12:30 UTC Released

BRForeign Direct Investm't*

Actual

8.2 Bln USD

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7.2 Bln USD

Previous

1.0000 Bln USD

November 23 12:30 UTC Released

BRCurrent Account*

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-0.343 Bln USD

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-1 Bln USD

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0.657 Bln USD

November 23 13:00 UTC 1414m

RUCbank Wkly Reserves*

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Forecast

Previous

426.4 Bln USD

November 23 13:00 UTC 1414m

ZAPrime Rate*

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Forecast

Previous

10.25 %

November 23 13:00 UTC 1414m

ZARepo Rate*

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6.75 %

Previous

6.75 %

November 23 13:30 UTC 4444m

CARetail Sales MM

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Forecast

0.9 %

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-0.3 %

November 23 13:30 UTC 4444m

CARetail Sales Ex-Autos MM

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Forecast

1 %

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-0.7 %

November 23 14:00 UTC 7474m

MXIGAE Econ Activity MM

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Forecast

0.14 %

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0.21 %

November 23 14:00 UTC 7474m

MX1st Hlf-Mth Core Infl YY*

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4.71 %

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4.75 %

November 23 14:00 UTC 7474m

MX1st Hlf-Mth Core Infl YY*

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Forecast

0.73 %

Previous

0.62 %

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