Thursday, January 27, 2011

Contango

Front month Oil is trading at $85.72. December delivery is trading at $95.15.

I have no idea why the front month is breaking down and the later months are not... but it makes it very, very tough on the speculators to guess how the gap gets closed... and it favors the equities.

Careful out there.

6 comments:

bureaucrat said...

Even Jim Rogers couldnt explain the historically huge difference today between Brent crude (UK) and WTI (Texas) crude. I'd like some kind of explanation for that as well.

Anonymous said...

WTI isn't relevant anymore.

http://online.wsj.com/article/BT-CO-20110127-711317.html

bureaucrat said...

I dont want to log on or subscribe. :)

"America" still produces 5+ million barrels of oil a day (mostly 10 barrels per month from 400,000 pumpjacks). Should still be somewhat relevant.

Greg T. Jeffers said...

Not just the WTI Brent spread... the Contango on the curve for 2011 is FUBAR...

bureaucrat said...

Is it possible the Fed and its banks are selling their inventory of WTI contracts to push down the price of WTI oil overall (with Brent crude being a more accurate indicator of oil's demand), just like they are buying Treasuries to increase the price of Treasuries but decrease the yield? (which doesn't appear to be working)

Anonymous said...

Could it be that US demand is tanking in the face of higher prices, so there is a temporary glut in Oklahoma. Low spot prices will push down on futures near delivery date. I think that Brent is closer to the ROTW in pricing. Who knows? It seems that product should be crossing the Atlantic toward Europe sooner or later and equalize the prices.

They've goosed the economy pretty good again in 2011. Between the Fed's announced purchases and the "compromise," which was a nifty way for Congress to sneak a $900B stimulus package right under everyone's nose, there ought to be lots of loose change around. Still, things don't look so good.

Regards,

Coal Guy