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Bulls push energy complex higher
6th October 2010 15:36 GMT

It appears that after eight months the bulls may finally be able to push the energy complex higher and out of the recent moribund range. Dollar weakness as well as a blazing September for equities have put bears to the fire. From a strictly fundamental viewpoint, the world remains awash in crude oil and products but new influences have begun to assert themselves. The French port strike looks to continue indefinitely, while dozens of vessels remain trapped off the coast. At the same time, the expectation of further quantitative easing in the United States as well as an easing of the money supply in Japan has the bulls out in force.

It is certainly not too late for consumer hedgers to lock-in protection against further upside moves. Those worried about a price spike in bunker fuel can lock in $75/month of protection in 1H11 by owning the Singapore 180cst Fuel Oil $525/600 call spread for zero cost by accepting a leveraged price floor around $410. As mentioned, this hedge provides $75/month of protection through 1H11 above $525 with no premium at risk at or above the $410 level.

Jonathan Kornafel,
6th October 2010 15:36 GMT

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