Futures Spread: Oil Bulls Are Back


Nov. 20 2020, Updated 3:16 p.m. ET

Futures spread

On April 22, the US crude oil June 2019 futures closed ~$3.9 above the June 2020 futures. On April 15, the futures spread was at a premium of $2.6. On April 15–22, US crude oil June futures rose 3.1%.

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Rise 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 expanded. US crude oil prices rose just above three percentage points. Inventories falling below their five-year average and the end of US waivers boosted oil prices. If the spread’s premium expands more, it would signal an additional rise in the bullish sentiments for oil.

Energy stocks

On April 15–22, oil-weighted stocks Oasis Petroleum (OAS), Carrizo Oil & Gas (CRZO), and Denbury Resources (DNR) rose 7.7%, 9.9%, and 13.3%, respectively, and outperformed their peers.

Forward curve

As of April 22, the US crude oil futures contracts for the next year were priced in descending order. The price pattern is a positive 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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