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Market Structure In Crude Oil Sends Conflicting Signals


  • A significant comeback in the energy commodity but inventories remain high.
  • Brent-WTI moves lower - Bullish or bearish?
  • Crack spreads - Not running away on the upside - A caution about demand but the output is falling.
  • Term Structure - Supportive of the rally.
  • Technicals are all over the map - BNO is the Brent ETF product as Brent could be most sensitive to geopolitical events.
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Market structure in the crude oil market are pieces of a jigsaw puzzle that can provide clues about the path of least resistance for the price of the energy commodity. The Brent-WTI spread is a location, quality, and political risk spread, Crack spreads reflect the price differential between petroleum and oil products. Term structure is the shape of the forward curve. Trends in the pieces that comprise the market’s overall structure can lead to a robust picture of supply and demand.

Technical factors when it comes to price action, tell us about herd behavior. When I began trading in commodities markets in the early 1980s, a senior trader said to me that raw material prices move higher when there are more buyers than sellers, and lower with selling overwhelms buying. A price chart and the statistical analytics contain all of the technical information on one page. A combination of technical and fundamental data often presents a comprehensive view of a market. After wild volatility in the crude oil market over the past months, the volatility is likely to continue.

The United States Brent Crude Oil product (NYSEARCA:BNO) moves higher and lower with the Brent futures that trade on the Intercontinental Exchange.

A significant comeback in the energy commodity but inventories remain high

After a ride in an elevator shaft to the downside in March and April, the price of NYMEX WTI crude oil futures has staged an impressive recovery.

Source: CQG

The daily chart of the active month July futures contract highlights the rebound in the energy commodity. May futures fell to a low on April 20 in negative territory. The June contract fell to a bottom of $6.50 per barrel on April 21. The low in July futures was a few days later on April 27 at $17.27. The most recent high came last week

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This article was written by

Andrew Hecht profile picture

Andrew Hecht is a 35-year Wall Street veteran covering commodities and precious metals.

He runs the investing group The Hecht Commodity Report, one of the most comprehensive commodities services available. It covers the market movements of 20 different commodities and provides bullish, bearish and neutral calls; directional trading recommendations, and actionable ideas for traders. Learn more.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

The author always has positions in commodities markets in futures, options, ETF/ETN products, and commodity equities. These long and short positions tend to change on an intraday basis.

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Comments (1)

Robert Boslego profile picture
As clearly shown by your data, wti-brent spreads, crack spreads, and time spreads are not predictive of oil price movements, as I have substantiated with empiical evidence over the years.
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