Oil timespreads tend to be traded from a fundamental perspective (meaning an analysis of supply/demand conditions), while flat price trading includes a strong technical perspective (using trend following systems, chart recognition, etc. to make decisions)… Kemp suggests that physical traders are showing skepticism of an OPEC agreement with evidence showing up in the spread market:
“For many physical traders, timespreads rather than spot prices provide the most reliable guide to the supply-demand-stocks balance (“Brent contango is hard to square with missing barrels”, Reuters, March 9 ).”
“In the past, a strengthening of crude timespreads has usually coincided with a shift in the supply-demand balance from surplus to deficit (tmsnrt.rs/2eeJkpP).
“But timespreads in Brent, more representative of global oil market conditions, have remained weak despite the Algiers agreement (tmsnrt.rs/2eeHG7B).”
“Continued weakness in the spreads suggests many market participants see the road to rebalancing as a long one with a sustained drawdown in crude inventories still some way into the future.”
Here is the chart:
http://www.reuters.com/article/oil-global-kemp-idUSL8N1CR3U1
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