Oil’s Futures Spread: Are Bullish Sentiments Rising?

Futures spread

On April 1, the US crude oil May 2019 futures closed ~$1.7 above the May 2020 futures. On March 25, the futures spread was at a premium of just $0.08. On March 25–April 1, US crude oil May futures rose 4.7%.

Oil’s Futures Spread: Are Bullish Sentiments Rising?

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 by nearly five percentage points. A fall of 90 thousand barrels per day in the EIA’s Monthly Oil Production report released on March 29 supported oil prices. US crude oil inventories are below their five-year average, which impacted oil’s rise. If the spread’s premium expands more, it would signal more bullish sentiments for oil.

Energy stocks

On March 25–April 1, oil-weighted stocks WPX Energy (WPX), California Resources (CRC), and Denbury Resources (DNR) rose 8.6%, 10.5%, and 13.9%, respectively, and outperformed their peers.

Forward curve

As of April 1, the US crude oil futures contracts for May and August were 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).