Singaporean oil-focused hedge fund, RedWell Fund SPC, has turned its attention to the distillates market reported the Business Times this week and begun tradinPARA_BREAK_SENTINEL_9f8e7d6c

Singaporean oil-focused hedge fund, RedWell Fund SPC, has turned its attention to the distillates market reported the Business Times this week and begun trading in Singapore’s OTC swaps market. The fund’s president, Wei Min - a 10-year distillates trading veteran – said that 70 per cent of its USD13million in AUM would be allocated towards taking positions in the regrade (price spread between jet fuel and gas oil) with the remaining 30 per cent invested in fixed-price contracts of the two distillate products. Wei confirmed that once the fund’s targets (30 per cent by 2H11) had been met, his clients, mostly from Hong Kong and China, would increase allocations to USD30million. To get things underway, Wei said that he had already traded two million barrels of regrade, taking a short position by acquiring predominantly forward quarterly contracts. “The regrade is the ideal contract for us to start with, in terms of its risk-reward potential,” said Wei.Redwell is far from the first hedge fund to apply an oil markets strategy. Last year, Andrew Serotta, ex oil trader at Vitol Group, launched a similar fund, whilst USD1.5billion London-based hedge fund, BlueGold Capital, also trades oil futures. The reason for turning his attention to regrade, was, in Wei’s opinion, due to the fact that it was less volatile and had lower risk compared to flat-priced gas oil and jet fuel contracts, “but yield (sic) higher returns than the timespreads for both products”. The prompt December contract traded at a 10-month high of USD1.60 last Friday. Wei said that he would soon look to hedge his distillate positions by possibly trading US West Texas Intermediate (WTI) and London Brent crude futures.