Fw: EOD Commodities Note - 13 Jan

OIL

Interesting day in crude today. NY walk=d in to a market down 4%, yet both crudes rallied during the NY day. WTI rallied much more and the arb traded positive at some point in the day. I think the arb could probably trade as high as +2 as Feb WAF crudes are going to have to discount heavily to find a home given the strong loading programs of Azeri, FSU, and N Sea...l think that if the arb remains str=ng over next few weeks, it may be time to sell WTI boxes in the m/u 15 region. Prompt WTI spreads were also quite bid as BP Whiting restarted operations. News wise, 12 VLCCs have apparently been booked to store circa 25M bbls of crude. Furthermore, 4M bbls of N SEA crude are heading to S Korea this month. This put a small bid in prompt BRE spreads, but not nearly as much as one would have assumed. The EIA STEO came out; 201In products land, distillate was weaker as BP whiting returned, yet gasoline rallied yet again...

Oil Vols

Oil vols were stronger today in cal15, especially the more prompt ones, as we broke the 46 support level overnight. Interestingly, H2 2016 vols sold off a bit. We saw interest in upside call buying in H12015 WTI as well as ATM put selling. Interestingly, earlier in the morning, circa 17K (9k OTC, 8K on screen) 35$ clh5 puts were bought. We think there is good value in buying a Z6 65/72 call spread versus selling a 40 put (currently zero cost-ish) as a bullish flatprice/short vega play betting that more deferred crude prices may rally back a bit.

crude oil trading commentary below.

Implied vols in WTI today.

&nbs=; WTI (/change)
H15 (Mar15) =8.70% +1.40%
M15 (Jun15) =2.20% +1.45%
Z15 (Dec15) = 36.15% +0.55%