Ask/bid spread for June/July crude

Discussion in 'Commodity Futures' started by heech, May 17, 2010.

  1. heech


    Hi there,

    Just noticing June crude futures has an ask/bid of a couple of ticks, at most. It's been this way for the last week or two.

    On the other hand, July futures has an ask/bid that's significantly larger... after-hours, spread goes up to as large as 6-8 ticks.

    Any reason for this? Is it just a volume thing? I would've thought most traders would've already rolled over to the new month, especially since June options expired today.

    Traders Jump on Oil Benchmark Spread

    Oil traders are finding new opportunities in a "broken" price benchmark.

    Activity has surged in crude-oil options that allow traders to bet on the difference in price between the front two futures contracts. This spread has blown out over the last two months as record oil inventories at Cushing, Okla., the delivery point for barrels traded on the New York Mercantile Exchange, have depressed the value of front-month futures to an almost unprecedented degree.

    Front-month oil futures have recently traded almost $5 lower than second-month contracts. This is the biggest difference between the two since February 2009, when the recession cut oil demand, inflating supplies at Cushing and driving prices toward $30 a barrel.

    On Tuesday, June futures settled near an eight-month low of $69.41 a barrel. As in early 2009, contracts for delivery later in the year haven't fallen nearly as far, nor has the price of oil outside the Cushing market. The disconnect has fueled arguments that Nymex futures are a broken benchmark, reflecting supply and demand only in the U.S. Midwest despite being the most heavily traded oil contract globally.

  3. OP, you watching MN right now?

    Its fun. :D
  4. sucks for whoever had to sell out their longs at 2:29pm 100 points lower than the high...