Backwardation in Oil Prices

Thursday July 7, 2022

Normally distant oil future prices are higher than current prices. This makes sense as it costs money to store oil for future delivery.  This situation is called contango.

Now however near term prices are higher than distant prices. This is no doubt due to the increase in world demand while the Western nations attempt a boycott of Russian Oil.  The message is that the near term price of oil must eventually come down to meet the distant price. So we should expect further weakness in the current price, don't be surprise by $85.

Tom Mclellan shows the disparity in this post.