This switch from backwardation
to contango indicated ample inventories relative to demand in the spot markets.
A contango market is often confused with being normal, just because it has been prevalent more recently; but in fact contango is rarer than the backwardation
Between 1984 and 2004, the average difference between first-month and third-month US crude futures was 41 cents per barrel backwardation
Things have calmed down a little since then but the backwardation
is still there, valued at $18.
The buying "increased backwardation
and the prompt market is heating up," said Ehsan Ul Haq, a senior analyst at KBC Energy in Walton-on-Thames, England.
Nonetheless, the recent trend toward a narrowing backwardation
remains intact, signaling the market is no longer prepared to pay a high premium for prompt cargoes.
Nevertheless, with ample supplies in Chinese stockpiles, the shortage may be reflected more in a persistent backwardation
on the LME rather than significantly higher copper prices.
So if backwardation
is starting to disappear it suggests a lack of demand for actual crude.
Key Atlantic Basin products are now in backwardationFor all the hype about the WTI crude oil market potentially moving into backwardation
later in the year, European ICE gasoil and NYMEX RBOB gasoline markets in the Atlantic Basin have quietly started to price in a premium for immediate delivery.
Futures for the leading global indices and the RTS index are within deep backwardation
The movement of passive investors into commodities shifted markets from backwardation
to contango, the condition that occurs when futures prices exceed cash prices.
Rifkin of OmniSource said the copper market's pricing and backwardation
shows "the market is screaming for that material to come to the market today.