WTI Backwardation?

N

nemesis45

Hi,

Do you guys have any ideas as to why the wti spreads are still backwardated?

Only explanation I have right now is that market expects an even steeper move down to 70's over the course of the year. There is no reason as of yet for OPEC to reduce production.

Still i would love to hear the fundamental aspects of the calendar spreads.

PS to the admins: Quality of discussion on ET has detiorated and you guys know why. Do something about it? Its been a long while and its not even funny anymore.
 
Mkt pricing further declines, that's all there is to it. Saudis are refusing to cut production, so the spread is just reflecting the ongoing dynamic.
 
Martinghoul said:
Mkt pricing further declines, that's all there is to it. Saudis are refusing to cut production, so the spread is just reflecting the ongoing dynamic.
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Marty, in the oil markets, oil is usually almost always bullish in backwardation. Contango markets are bearish. For example, Brent went into steep contango when it broke 100 and collapsed. What is going on in the energy markets right now is anything but simple. A lot of moving parts. One thing is for certain, we are drowning in supply with declining growth in the G10.
 
Maverick74 said:
Marty, in the oil markets, oil is usually almost always bullish in backwardation. Contango markets are bearish. For example, Brent went into steep contango when it broke 100 and collapsed. What is going on in the energy markets right now is anything but simple. A lot of moving parts. One thing is for certain, we are drowning in supply with declining growth in the G10.
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You're correct, I should have been more careful reading the original post... In fact, everywhere I look I see contango, rather than backwardation. That's what makes sense to me and I am not surprised by the shape of the curve currently.

I should have really asked the OP to be more specific about what particular spread he/she was looking at. Happily, the OP says he sees contango as well, so everyone now on the same page. I apologize for the confusion.
 
I meant the whole curve looked strange to me in general, but more specifically the front month calendar.
Much more comfortable now that it has come into contango though
 
With so many barrels going into storage on account of the Brent/Dubai contangos, I think the WTI curve should steepen in a similar fashion. When the WTI rolls open enough to offer storage arbs on WTI, we'll get even more bbls going into storage which should depress prices further.
 
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