WTI: Taking profits on short spread – TD Securities

Dhwani Mehta FXStreet

The TD Securities Commodity Strategists provide a strategy on trading WTI short spread amid expectations of oversupply starting out 2020.

Key Quotes:

“We previously entered a short WTI Mar-Jun spread trade at $1.15/bbl, as we expected oversupply in the first half of 2020 to see front end spreads return to contango. In the aftermath of the US-Iran tensions, the spreads reacted aggressively in our favor as bearish US inventory stats raised demand concerns once again.

With the US-China trade deal including lofty energy purchases, and risk appetite remaining fairly strong, which offers near term optimism, we are opting to take profits on the trade at $0.63/bbl.

While we still see a significant surplus on the horizon for the first half of the year and battered refining margins globally as a cause for concern regarding crude demand, short term risk-on dynamics could lend support to the front end of the curve preventing further material weakness in the spread before the end-Feb expiry.”

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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