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Futures Spread: Bullish Sentiments Fall for Oil

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Nov. 20 2020, Updated 4:55 p.m. ET

Futures spread

On April 15, the US crude oil May 2019 futures closed ~$2 above the May 2020 futures. On April 8, the futures spread was at a premium of $3.5. On April 8–15, US crude oil May futures fell 1.6%.

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Fall in bullish sentiments

The market sentiment towards the oil demand and supply situation is reflected in the futures spread. In the last five trading sessions, the spread’s premium contracted. US crude oil prices fell by nearly two percentage points. The rise in US crude oil supply might have dragged the spread’s premium and oil prices. If the spread’s premium contracts more, it would signal an additional fall in the bullish sentiments for oil.

Energy stocks

On April 8–15, oil-weighted stocks Carrizo Oil & Gas (CRZO), Occidental Petroleum (OXY), and Denbury Resources (DNR) fell 6.3%, 7.3%, and 10.3%, respectively, and underperformed their peers.

Forward curve

As of April 15, the US crude oil futures contracts for May and June are priced in ascending order. The price pattern is a negative sign 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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