It’s brave to say we have seen the lows and this correction is over but fundamentals driving this market remain. Both WMP and AMF have move from steep backwardation to flat and edging towards contango. We remain comfortable buying the back of the curve below US$4500.
The backwardation in SMP remains steep; the main reason is supply is still tight in the spot market. We recommend trades that look to take advantage of this curve flattening. Sell May and buy October at $300.
The biggest arbitrage between GDT and futures is the AMF trade. It’s worth US$450 per tonne which is close to 10%. Rather than buy C6 on GDT, buy the July futures and maintain that position until July becomes the front future then buy your underlying futures position in C2 in July (50% in each auction).
