HardAssetsInvestor

Written by Sumit Roy  |

July 16, 2012

Contango Report: Brent Backwardation Widens, NatGas In Backwardation For Second Week

Details

The two energy benchmarks offer favorable roll yields for traders.

Featured Commodity

CONTANGO WATCH: Brent’s backwardation widened significantly this past week, as renewed supply concerns continued to fuel a rally in prices. Sanctions on Iran have cut its oil exports in half from normal levels and fellow OPEC members such as Saudi Arabia have had to significantly increase their output to compensate.

This has reduced the cartel’s spare capacity—the amount of production members could bring online if necessary—to the lowest level since 2008, when oil peaked at $147. The market is thus very susceptible to external shocks and the premium on front-month contracts is accounting for that.

ROLL COSTS: Investors net 10.19 percent annualized from rolling front-month Brent contracts, up from a net of 5.75 percent.

BOTTOM LINE: Backwardation

Has oil moved into backwardation yet? What does corn’s roll yield look like? How do you know when it’s time to buy—or sell?

Each week, we investigate the futures curves of the U.S.’ most important commodities, helping investors better understand the market and seize buy-and-sell opportunities as soon as they arise.

To see current contango curve and front-month roll costs for each of our selected commodities, please select a sector or commodity below (or read the whole report ):

Data as of close on July 13, 2012
Data courtesy IndexUniverse.com