Good morning

Let’s start shortly with the following daily UK OIL (Brent) chart; first of all, notice how this benchmark has not gone negative during the US OIL sell off the day of last month expiry but the lowest mark it has traded at has been close to 19.50$ a barrel. Since then the recovery started and it’s now approaching the late March highs, the 66 EMA and an interesting down trend line: will see how it will react there, if it will break it and go filling the early March gap (the failed Opec meeting, remember?) or it will be rejected.

UK OIL, Daily

There’s a good news flow sustaining Oil prices these days: just from today the rumor that OPEC countries will probably the May – Jun production cuts to the whole 2020, helping managing the glut in the market.
Courtesy of Goldman Sachs with data from the Commodity Futures Trading Commission (CFTC -you can discover open interests and many other data there), the following chart shows that bets of funds investing in Oil products have never been so bullish since April 2019. Before getting to any conclusion however, please check the price action when the patterns represented in this chart happened.

Bets of Managed Money on Oil

What we wanted to underline in this post is another factor: how the spread between US in-land produced and UK extracted from platform in the sea Oil has evolved lately and during last year. All the storage narrative have made a big difference here as we already discussed in previous posts.

What you can see from the next chart, represented on a logarithmic scale for clarity, is that while swinging widely from mid-March to mid-April and touching a max of 54.34 $ (when US WTI went negative), the spread is now coming back to its last year average (5.624 $). Please notice that the 1.51$ value is referred to 7th May, the last day that I’ve been able to track in this chart: right now (18-05, 10:31 EET) the value is already printing 2.72$.

Thinking about trading this difference could make sense in your energy products strategy and would help you to minimize your risk.

Marco Turatti
Technical Analyst

TIO Staff

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