What’s the Oil Futures Market Saying?


Nov. 20 2020, Updated 4:22 p.m. ET

Futures spread

On July 2, US crude oil August futures closed ~$10 above the August 2019 futures contract. On June 25, the futures spread was at a premium of $5.4. On June 25–July 2, US crude oil August futures rose 8.6%.

The market’s sentiment toward oil’s demand and supply situation is reflected in the futures spread. In the past five trading sessions, the spread’s premium almost doubled and US crude oil prices rose to near 9%.

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The situation in the oil futures market reflects tightness in the demand-supply situation in the short term. There are concerns that the supply might fall short of the demand in the short term. In fact, the production outage in the Syncrude facility in Canada has drained US crude oil inventories at a steep pace. In the previous part, we saw that US crude oil inventories were 4% below their five-year average in the week ending June 22—compared to 2% in the previous week.

Energy stocks

On June 25–July 2, California Resources (CRC), RSP Permian (RSPP), and Concho Resources (CXO) rose 9.2%, 8.4%, and 8%, respectively—the largest gainers on our list of oil-weighted stocks.

Forward curve

As of July 2, US crude oil futures contracts for delivery between August 2018 and July 2019 were priced in descending order. The price pattern is expected to be positive for ETFs that follow US crude oil futures like the ProShares Ultra Bloomberg Crude Oil ETF (UCO) and the United States 12-Month Oil ETF (USL).


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