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Spread
A spread is the difference between two related prices, such as bid-ask, futures contract months, or regional commodity benchmarks. In oil markets, spreads indicate arbitrage opportunities, market sentiment, or logistical differences.
For example, a Brent-WTI spread highlights the price difference between the two crude grades, guiding trading and hedging strategies. Similarly, a seasonal spread may reflect demand variations.
Spreads are used for risk management, speculative strategies, and portfolio optimization. Traders analyze spreads to identify inefficiencies, optimize timing, and manage exposure.
Understanding spreads allows market participants to enhance profitability, reduce risk, and make informed trading decisions in volatile commodity markets.