The oil futures curve has flipped into backwardation for the first time since early days of the coronavirus pandemic, relfecting tighter conditions.
According to Bloomberg:
Backwardation suggests traders will start to struggle to keep oil in storage. That, in turn, may mean that lots of barrels are going to be released into the market. At the same time, the curve is also signaling that the market currently needs those supplies.
Brent futures for January are now trading above the February contract. Similarly, West Texas Intermediate for December 2021 is now trading at prremium over the same contracts for a year later.
These developments show traders are reassessing prospects of a rebound in demand in the wake of coronavirus vaccine optimism and easing of political uncertainty in Washington.
Share
