On January 7, US crude oil February 2019 futures closed ~$3.1 below the February 2020 futures. On December 31, the futures spread was at a discount of ~$3.2. On December 31–January 7, US crude oil February futures rose 6.8%.
Bearish sentiments reduced for oil
The market sentiment towards the oil demand and supply situation is reflected in the futures spread. A contraction in the discount is usually accompanied by a rise in oil prices. In the last four trading sessions, the spread’s discount contracted and US crude oil prices rose by nearly seven percentage points. China’s dialogue with the US about the trade war and the fall in the US oil rig count, which we discussed in Part 2, might have supported oil prices.
With inventories 8% above their five-year average, there might be an expansion in the discount going forward.