STO at $7.oo. What to do?, page-106

From Bank of America on oil.
Watch out below tonight...

Crude & Refined Products:  Oil prices finished the day higher with Brent up $1.44 and WTI up $46.23.  Spreads, while stronger overall, definitely lagged the outright price action, with Dec16 up over 90 cents in both benchmarks.  Overall volumes on the day were light as weather in New York delayed some and kept others home.  The EIA numbers are due today and are expected to show large builds.  If we get numbers similar to last week (10MM build), look for flat price to test last week’s lows. Additionally, there is increasing evidence of tankers being booked for floating storage, with news of one VLCC loading in the North Sea this week likely to store crude on water rather than sending barrels to Asia for onshore storage.  Vols finished weaker on the day, down a surprising 3% in the front of the curve (now sub $1.50 breakeven), and with March option expiry a little over two weeks away, there are some good premium plays available (e.g. $40 puts in WTI for $0.50).

The storm of the century fizzled out and HO spreads went with it, losing -75pts through June after a sizeable rally yesterday.  Conversely, m/z RBOB rallied +100pts higher as the market was keen to focus on returning gas demand.  Effectively, the snow trade was undone yesterday, and quickly.  Winter RBOB remains weak in NYH as spreads failed at resistance and light ends are still abundant, but diffs are still tight in GC on FCC outages and strong exports.  HO should be supported by colder P1 weather the next 2 weeks.