1. Crude Oil Calendar Spreads &
Flies

2. Benchmarks of Crude Oil
• West Texas Intermediate (WTI)
• Brent
• Dubai
• OPEC basket

3. Benchmarks Traded
• WTI
• Brent

4. Specification of future contract
• Price : $/barrel
• Qty in 1 lot : 1000 barrel
• Min Movement : 1cent

5. Characteristics of Crude oil
• API Gravity
• Higher the API gravity lighter the liquid
• Specific Gravity
• Ratio of Density
• Sulphur Content
• Lower the sulphur content better the quality

6. Comparison of WTI & Brent
WTI Crude oil Brent Crude oil
• API Gravity : 39.6 • API Gravity : 38.06
• Specific Gravity : 0.827 • Specific Gravity : 0.835
• Sulphur Content : 0.24% • Sulphur Content : 0.37%

7. Brent Term Structure
123
outright
122
121.83
121.21
121
120.79
120.27
120
119.62
119 118.91
118.27
118
117.62
117 117.02 116.91
116.36 outright
116
115.79
115
114
113
112
1 2 3 4 5 6 7 8 9 10 11 12

8. WTI Term Structure
95.5
outright
95.1
95 94.98
94.82
94.75
94.63
94.5 94.5
94.4
94.28
94 94
93.78
93.5 93.5
outright
93.1
93
92.5
92
1 2 3 4 5 6 7 8 9 10 11 12

9. Contango & Backwardation
• Contango: Futures Price > Spot Price
• Backwardation : Futures Price < Spot Price

10. Calendar Spread
• Difference between two month crude outright
prices of the same benchmark
• 1st month crude future price – 2nd month price
= 1st month calendar spread and so on

11. Example
• June crude futures price = 94.50
• July Crude futures Price = 94.83
• August Crude futures Price = 95.10
• September Crude Futures Price = 95.38
Price of first, second and third month calendar
Spreads ??

12. Flies
• Difference of calendar Spreads
• Calculated the same way as the spreads
FLY Calculation

13. Factors affecting calendar Spreads and
flies price
• Supply and Demand of crude oil
• Weather conditions
• Overall Sentiment in crude futures market
• Geo political Situations

14. Calculations
• First month : 94.50-94.83 = -0.33
• Second month : 94.83-95.10 = -0.27
• Third Month : 95.10-95.38 = -0.28

15. Fly Calculations
• First month Fly : (-0.33) – (-0.27) = 0.06
• Second month Fly : (-0.27) – (-0.28) = 0.01