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Schork Oil Outlook: Oil Contracts…A Tale of Two Cities

Crude oil prices in New York jumped 2% in 30 minutes after reports broke regarding Iran’s intent to send two naval gunboats through the Suez Canal en route to Syria.

Prices of the Brent contract in London rose by 2% as well. The one significant difference, of course, is that the NYMEX contract for April delivery peaked at below $89, while the corresponding contract in London peaked well above $104.

As illustrated in today’s issue of The Schork Report, the spread between these two contracts moved out to $15.94 or 18% while dated Brent closed at an $18 or 22% premium to cash barrels at Cushing.

Aside from their underlying fundamentals (glut in the Midwest, output snafus in the North Sea), both markets are now moving on polar technical paths. Last night the Brent futures contract settled 7.4% above its (positively sloped) 50-day moving average. The market on the NYMEX finished 3.3% below its (negatively sloped) 50-day average.

Bottom line, the chasm between these two markets is great and is showing no sign of narrowing.

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Stephen Schork is the Editor of The Schork Reportand has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.

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