Oil traders place spring bets on "widowmaker"
Oil traders place spring bets on "widowmaker"
Oil traders place spring bets on "widowmaker"
(Reuters) - Some of the boldest speculative oil traders at banks Montreal canadiensand hedge funds are betting on a return of gasoline's strength ahead of peak summer demand, bringing an early shift to summer from winter to the oil market#x.
Many traders use a popular spread play between gasoline and heating oil to try to make money from seasonal shifts in demand in the Northern Hemisphere.
But the spread is one of the most volatile and unpredictable in the oil market and is often called "the widowmaker" after the plight of those who have made the wrong bet.
Unusually cold winter weather and a belief in resurgent gasoline demand this summerMontreal canadiens has lured traders back onto the seasonal play after 2009's relatively flat demand picture, analysts and traders said.
"We have seen massive speculative inflows this year and this has helped boost the gasoline premium over distillates,State Flags," said Olivier Jakob of Petromatrix. "It is trying to price in the gasoline season a bit early."
Traders said historically low refinery utilisation rates of around 80 percent in the United States and Europe triggered by a sharp drop in industry demand for middle distillates, such as diesel, should constrain gasoline supply in the world's top oil consumer.
"The hot money is on gasoline this season and a lot of hedge funds have bet on it," said an oil products trader at a bank and a regular widowmaker trader.
"Seasonality#x is back because of run cuts and because it's been such a cold winter. There is a belief that demand for gasoline will be very good this year Montreal canadiensbecause it is not as connected to the recession as distillates," the trader said.
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