FxWirePro: Arrest potential bullish risks in Brent via far-month tenured time spreads and WTI via call spreads

Both Brent and WTI crude oil prices have been edgy moving in sideways. WTI dropped from yesterday’s close at $63.70 to the current $63.31 levels.

Inventories check of the U.S. crude dropped by 4.617 million barrels for the last weekend, perplexing prospects for a rise of 1.4 million barrels, according to data from the Energy Information Agency (EIA) on Wednesday.

Although oil prices have clearly rallied since last Thursday (up 7%), there is clearly a difference between the direction of front-month spreads and Brent DFL swaps.

Uphold stay long July 2018 ICE Brent and short July 2019 ICE Brent trade. We would like to take some profits on our long Brent spread and keep half of the trade open as we remain supportive of our current oil price outlook as fundamentals remain supportive.

We remain long the same Brent spread contract with a stop loss at $2.7/bbl and target of $5/bbl.

Stay long the July 2018 ICE Brent and short July 2019 ICE Brent spread at $3.46/bbl. Target of $5.00/bbl and stop loss of $2.70/bbl. Profits taken on half the trade on at $4.46/bbl, for an unrealized gain of $0.5/bbl, or 0.7% of the underlying.

Stay long December 2018 WTI $62-72 call spread: The increased geopolitical risks and the recent message from the US producers highlighting some risks to the US supply in 2018 points to some risks to US and global oil market balances in the near term.

Given the still constructive view on oil prices in the coming months, we remain happy to stay long via a call spread. This is a cautious way to gain upside exposure to higher oil prices with limited downside.

Stay long a December 2018 WTI $62.10-72/bbl call spread (net premium: $1.40/bbl). Marked to market at $1.3/bbl, for an unrealized loss of 10¢/bbl, or -0.16% of the underlying.

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