Brent-NYMEX Oil Spread Widening
Posted on May 15, 2012 at 14:56 PM EDT
During the month of May so far, Brent crude oil futures have declined from $128.40 to $110.93 (-$17.47), or nearly 14%, while NYMEX Oil has declined from $106.49 to $93.65 (-$12.84), or about 22%. This has resulted in a widening of the Brent-NYMEX differential from $13 to nearly $18. Judging from both the recent up-leg pattern of the differential and the powerful position of its near-vertical momentum gauge, the Brent (British North Sea oil)-NYMEX (U.S. oil) spread should continue to widen towards a retest of its year-long resistance line, now at $19.95. Based on my analysis of the respective Brent and NYMEX crude oil charts, my suspicion is that a continuation of the widening of the spread towards $20.00 will be a function of NYMEX deteriorating towards $88-$85, while Brent manages to hold in and around $110-$108.50. ETFs in play are the U.S. Oil Fund ETF (USO) and United States Short Oil (DNO), related to NYMEX oil, and the United States Brent Oil (BNO).
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