ULSD/HO February June Spread

The February HO/ULSD gained 87 points on settlement on Monday with some buying interest having been heard. Some suggest that refinery turnarounds will help the February gain on the June.

We suspect that the news of Chinese stimulus lends a positive tone for industrial fuels, thus benefiting the front end of the HO/ULSD curve.

In addition, a positive tone for the energy complex overall will support the HO/ULSD curve.

And it is worth noting that speculators are sitting more short than long in ULSD futures/options on the CME, thus likely giving some support on any strong down moves.Also colder weather will be supportive, thus drawing stockpiles down.

Technically the February versus June spread is still showing negative momentum, but we suspect that it will turn positive in a day or so given today's strong up move.Support for February versus June lies at Friday's low at 2.41-2.44 cents and then at 1.40-1.44 cents. Resistance is seen at 3.88-3.91 cents, then at 4.62-4.66 cents, and above that at the 5.39 cent area.

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