Go back a year ago and you would have seen an oil market in contango with the nearby contract at $60 and the futures one year out at $66 per barrel. We look at the same forward curve today and you see the nearby contract at $108 and July 2010 at $96, a steep backwardation.
So this is a commodity curve when the biggest oil user is going into a recession? The curve suggest that oil dynamics are changing with emerging markets having a stronger impact on price and OPEC being able to hold the line on production and cheating during the transition to recession. Unfortunately, the futures market messenger will be shot for this run-up. There is continued growing of the long positions in crude.
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