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Brent-NYMEX Crude Oil Spread Widening

Commodities / Crude Oil May 16, 2012 - 01:29 AM GMT

By: Mike_Paulenoff

Commodities

During the month of May so far, Brent crude oil futures have declined from $128.40 to $110.93 (-$17.47), or nearly 14%, while NYMEX Oil has declined from $106.49 to $93.65 (-$12.84), or about 22%. This has resulted in a widening of the Brent-NYMEX differential from $13 to nearly $18.

Judging from both the recent up-leg pattern of the differential and the powerful position of its near-vertical momentum gauge, the Brent (British North Sea oil)-NYMEX (U.S. oil) spread should continue to widen towards a retest of its year-long resistance line, now at $19.95.


Based on my analysis of the respective Brent and NYMEX crude oil charts, my suspicion is that a continuation of the widening of the spread towards $20.00 will be a function of NYMEX deteriorating towards $88-$85, while Brent manages to hold in and around $110-$108.50.

ETFs in play are the U.S. Oil Fund ETF (USO) and United States Short Oil (DNO), related to NYMEX oil, and the United States Brent Oil (BNO).


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By Mike Paulenoff

Mike Paulenoff is author of MPTrader.com (www.mptrader.com), a real-time diary of his technical analysis and trading alerts on ETFs covering metals, energy, equity indices, currencies, Treasuries, and specific industries and international regions.

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