Trade Idea: Long The Q3’24 Gasnap

Onyx Research Analyst Mita Chaturvedi’s trade idea this week is to long the Q3’24 Gasnap.

The gasoline leg of this contract has seen a steady and consistent rise over the year so far, and we expect this to continue. This length has been added to a steady bull run, which we expect players to hold on to as the prices roll up.

We have seen both financial and physical players not only buying the EBOB (gasoline) crack in the Q3, but also the gasnap contract specifically. This is especially interesting, as refiners are usually on the sell-side of this contract – and therefore unwinding positions – as a precursor to a further rally.

On the naphtha side, European naphtha flat price has been pushed to very high outright levels, with MOC offered and a lack of real demand at these prices. In addition, AG refineries are coming back online; this will further increase the naphtha, as a waste product of gasoline prioritisation.

This said, we recommend keeping an eye on volatility in this contract and monitoring positioning. If this contract becomes bloated and well in the money, we may see profit taking flows.

Finally, we hold an initial price target of $200/mt. Once this is hit, we recommend a tight trailing stop to protect profit.