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US Crude Oil’s Futures’ Forward Curve

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Forward curve

As of May 20, the US crude oil futures contracts until August are priced in ascending order. The price pattern is a negative sign for ETFs that follow US crude oil futures including the ProShares Ultra Bloomberg Crude Oil ETF (UCO) and the United States 12 Month Oil ETF (USL).

USL holds US crude oil futures’ deliverable for each of the next 12 months. UCO tracks daily changes in the Bloomberg WTI Crude Oil Subindex. A negative roll yield, which occurs when expiring futures’ contract prices are lower than the following month’s futures contract prices, would likely impact these ETFs’ returns. UCO’s actual and expected returns could also differ due to daily price changes.

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Rise in bullish sentiment

On May 20, the US crude oil July 2019 futures closed ~$3.12 above the July 2020 futures. On May 13, the futures spread was at a premium of $2.7. On May 13–20, US crude oil July futures rose 3.3%.

The market sentiment for oil supply and demand is reflected in the futures spread. Over the last five trading sessions, the spread’s premium has expanded. US crude oil prices have risen over three percentage points. Rising geopolitical tensions in the Middle East might have supported oil prices.

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