The bank has “little conviction” about the direction of prices and recommends caution for speculative investors and oil companies using risk hedges, Michael Wittner, head of oil market research at Societe Generale in New York, said in a report dated yesterday.
The premium of front-month Brent crude futures, traded in London, over the West Texas Intermediate contract, the U.S. benchmark price, increased 46 percent last month in the biggest jump since February 2011. The spread traded today at $18.69 a barrel, compared with the 11-month low of $7.93 on Dec. 27 and the record-high close of $27.88 on Oct. 14.
Traders who lost money on bets that the spread would narrow closed their positions, increasing the “speed and magnitude” of the widening in Brent’s premium, Wittner said.
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