The oil market resumed its downward trend in the past few days as WTI oil price fell to $92 and Brent oil dropped below $100. United States Oil (USO) also followed and declined by 3.2% since the beginning of the month. Let’s review the latest developments in the oil market.
The recent pull back in the price of oil wasn’t only in the spot price but also in future contracts. The Backwardation in the futures market has also resulted in a modestly better performance by United States Oil compared to WTI oil, as indicated in the chart below.
The chart shows the normalized prices of WTI oil and USO normalized to the end of June. The current gap between these two prices is around 2% over this time period. If the Backwardation further persists, USO could further outperform oil.
The rest of this analysis is at Seeking Alpha
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