Key Oil Spread Jumps to Seven-Year High in Sign of Supply Crunch
- Premium on WTI third month over fourth hits widest since 2014
- Last time the bullish gap was this wide oil traded above $100
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A key spread between monthly oil futures contracts has blown out to the widest level in seven years as traders bet that U.S. crude inventories are about to get a whole lot tighter.
The premium traders are placing on West Texas Intermediate crude for September delivery over October contracts touched $1.12 a barrel on Monday. Before this, the gap between the third- and fourth-closest contracts had only traded above $1 over two periods in the past 13 years -- in 2008 and from mid-2013 to mid-2014. During both of those previous spans, oil prices were well above $100 a barrel. Futures are now trading below $75 a barrel, making the current gap all the more extraordinary.