NYMEX crude April/May spread nears contango as oil weakens
- Source: platts
The April/May spread for NYMEX
crude narrowed 9 cents Monday to a backwardation of 3 cents/b, as the
M1/M2 spread continues to weaken, sitting on the precipice of contango
for the first time since January.
The same spread for ICE Brent also
softened Monday, but remains on more solid footing. The M1/M2 spread
narrowed 6 cents to 16 cents/b.
"One driver behind this
relative weakness in the nearby energy contracts has been some long
liquidation following recent establishment of record speculative crude
length by a wide margin," oil consultant Jim Ritterbusch said
Monday in a note.
The flattening of curves was
conveying "bearish overtures" that could discourage length
from reentering the market, he said.
Money managers' net length in
NYMEX crude futures peaked at an all-time high of 483,829 contracts
the week that ended January 16, according to US Commodity Futures
Trading Commission data.
The latest CFTC data showed net
length at 441,124 contracts the week that ended March 6, down 19,213
contracts week on week.
The change reflected money
managers boosting bearish bets for the first time in five weeks, in
addition to traders liquidating length.
NYMEX crude's nearby spread
flipped into backwardation in January for the first time since late 2014.
Steady draws in stocks at Cushing,
Oklahoma -- the delivery point for the NYMEX crude contract -- were
cited as one catalyst behind the shift from contango to backwardation.
But with the pace of withdrawals
slowing, and analysts saying builds could materialize soon, the impact
of Cushing storage on NYMEX crude's term structure seems to be fading.
If Cushing starts to see builds
soon, NYMEX crude's structure could return to contango, a note from JP
Morgan said last week.
The oil complex began the week
lower, paring some of the increases from Friday, when a broad rally
lifted equities and commodities.
NYMEX April crude settled 68 cents
lower Monday at $61.36/b. ICE May Brent settled at $64.95/b, down 54 cents.
NYMEX April ULSD fell 2.19 cents
to $1.8647/gal. NYMEX April RBOB settled down 1.03 cents at $1.8940/gal.
US equity indexes were lower for
most of Monday's session. In the afternoon, the Dow Jones Industrial
Average was down 164 points at 25,171, while the S&P 500 Index was
5 points lower at 2,781.