Oil Normalizing
January 27th, 2009 by 
reality
It seems that the contango is coming out of oil rather quickly. The front months are rising, and the back months are falling. Presumably the tanker fleets sitting at anchor storing crude to take advantage of the contango will quietly weigh anchor and proceed into port to unload. It is still nearly 20% (March 09 to March 10) but that is down from nearly 40%.
Posted in Commodities, Energy | 
2 Comments »
January 27th, 2009 at 8:30 am
Isn’t the contango trade a little misleading? It only exists because of the liquidity crisis. If you are not flush with cash, the proposition of locking in the forward gain would look pretty silly if your firm needs to borrow at libor + (name your spread).
January 27th, 2009 at 11:18 am
I don’t know. It wasn’t misleading me because I didn’t really draw any conclusion from it in the first place, other than it was abnormal and a sign of some distortion in the market. And now that distortion is going away, I guess, so we may get clearer price signals from now on.