Buttonwood October 2020 Update

The Buttonwood Energy Diversified 1 Program finished October up ~0.50% on trading level, returning ~7.00% YTD.

Volatility in the oil and refined products markets picked up towards the end of the month as major economies saw increases in COVID-19 cases. The main contributors to positive performance for the portfolio were long-biased propane bull spreads and robust trading activity. We remain bullishly positioned in propane, as we expect supply to lag increased demand as we move forward into winter.

The petroleum products portion which consists of crude, heating oil, and gasoline suffered losses from weakening demand due to coronavirus. Our outlook continues to be that if demand recovers in the next 2-4 months, it will be reflected most strongly in gasoline; therefore, we are long gasoline vs. short crude and fuel oil.

A similar theme played out in the natural gas portion of the book. A spike in COVID-19 cases toward the end of the month saw prices reverse course and finish lower. Currently, we remain bullish on natural gas and are positioned net long via calendar spreads. Natural gas storage levels remain lower than the 5-year average, and it is our belief that winter temperature surprises could produce much higher prices.

On a macro level, elections and Coronavirus continue to dominate headlines. We do not expect to add risk to our existing positions as we await the outcome of the election and monitor the recent surge of COVID cases in Europe and the US. The energy markets continue to provide the risk reward opportunities we seek through arbitrage, position trading based on technical analysis, and diversification through participation in the entire energy commodity complex.