Brent spread to widen to negative $16.98 in three months

02 Mar, 2015

SINGAPORE: The spread between US oil first month and Brent oil first month may widen to negative $16.98 per barrel over the next three months, as the nearest support at negative $13.54 may not hold.

Support is provided by the 50 percent Fibonacci retracement on the uptrend from the Oct. 14, 2011 low of negative $28.10 to the Jan. 15, 2015 high of $1.02.

The uptrend consists of five waves respectively labeled a, b, c, d, e. The wave b reversed more than 86.4 percent of the wave a, and the wave d reversed almost 76.4 percent of the wave c.

The current downtrend is thus deducted to at least reverse 61.8 percent of the uptrend. A Fibonacci retracement analysis reveals a target at negative $16.98, the 61.8 percent level.

A closer study on the wave structure of the downtrend indicates a further drop as well, as the spread is riding on a powerful wave 3 of a bigger wave c.

Copyright Reuters, 2015

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