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December 23, 2008
Something Interesting In The Oil Market
I was just having a look at the oil market and came across something interesting. Nymex Crude Future 38.74Now I have been following this market intermittently for the last few months and as I recall there was at most a few dollars difference between the different prices. And yet here we are with WTI priced way below the other two listings. There is something strange going on. Any oil guys care to explain? Or is the new bottom for oil going to be around $30 a bbl? Maybe it will resolve itself by the end of the day. Or not. Cross Posted at Power and Control posted by Simon on 12.23.08 at 01:39 PM
Comments
Bill is correct about oil. The exact opposite is happening in gold futures, that is, backwardation. There are more buyers for physical gold than there are sellers. Frank · December 24, 2008 01:46 AM Post a comment
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Yes it is what is know as cantango. when the futures prices end up with a much higher spread level. It has been going on if you look not just the cash and feb contract but out 6 months it has been widening.
It is because there is no storage available and no real credit to buy the oil to store. In normal times the out prices are in line with what can be made after paying the cash price the interest charge and storage charge, Then you sell the out contract and lock in a profit. None of these are available, It has been common knowledge that many oil producing controuies have been leasing tankers to just float on the sea and hold the oil they have no market for.
This is a very bearish setup. Until it breaks oil with go lower.