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Decoding Futures Market Jargon: Contango vs. Backwardation Prompt: Act as a market analysis assistant. Given the spot price of WTI Crude Oil is $80/barrel and the 6-month futures contract is trading at $85/barrel, identify whether the market is in contango or backwardation. Explain the defining characteristic based on the... show more

Tunc Satiroglu

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13,262 просмотров • 10 месяцев назад •via X (Twitter)

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Oil sold off the moment the Iran peace deal appeared. That part makes perfect sense. Nobody wants to be long crude into open supply routes and normalizing tanker flows. The fundamental value of oil is closer to 50 a barrel than 150. But here is where it gets interesting. If this were only supply normalizing, the curve would still hold its shape. Inventories are drained. Tankers are disrupted. Refineries are scrambling. As long as demand is firm, the curve should stay in strong backwardation. Backwardation means front-month crude trades above later contracts. It is the market telling you it wants barrels today. It is a sign of tightness. That backwardation is nearly gone. The prompt spread, the first two contracts, has narrowed to under a buck. The three-month spread has dropped to just over 2, after being 30 not long ago. The front is selling off far harder than the back. Some of that is supply normalizing. The good kind. But when the curve gets this close to contango this fast, it points to something more troubling. Contango is what a glut looks like in the futures market. Too much oil for the demand in front of it. The curve is not there yet. But it is moving that way. And that is the warning. You have to be careful about exactly why oil is plunging this far, this fast.

Oil sold off the moment the Iran peace deal appeared. That part makes perfect sense. Nobody wants to be long crude into open supply routes and normalizing tanker flows. The fundamental value of oil is closer to 50 a barrel than 150. But here is where it gets interesting. If this were only supply normalizing, the curve would still hold its shape. Inventories are drained. Tankers are disrupted. Refineries are scrambling. As long as demand is firm, the curve should stay in strong backwardation. Backwardation means front-month crude trades above later contracts. It is the market telling you it wants barrels today. It is a sign of tightness. That backwardation is nearly gone. The prompt spread, the first two contracts, has narrowed to under a buck. The three-month spread has dropped to just over 2, after being 30 not long ago. The front is selling off far harder than the back. Some of that is supply normalizing. The good kind. But when the curve gets this close to contango this fast, it points to something more troubling. Contango is what a glut looks like in the futures market. Too much oil for the demand in front of it. The curve is not there yet. But it is moving that way. And that is the warning. You have to be careful about exactly why oil is plunging this far, this fast.

Jeffrey P. Snider

49,942 просмотров • 1 месяц назад

I spoke with Mario Nawfal about OIL PRICES: “Market mania is alive and well. That's why oil prices have overshot on the downside. When the dust settles and fundamentals return, oil markets will snap back. Crude oil prices will return to a baseline of around $85-$90 per barrel.”

I spoke with Mario Nawfal about OIL PRICES: “Market mania is alive and well. That's why oil prices have overshot on the downside. When the dust settles and fundamentals return, oil markets will snap back. Crude oil prices will return to a baseline of around $85-$90 per barrel.”

Steve Hanke

20,454 просмотров • 25 дней назад

The oil market is about to break. Not in price. In availability. Jeffrey Currie 🆔++ on CNBC yesterday and the market still isn’t listening. “It’s not the price of oil that matters here. It’s the availability of oil.” A thread on why the next few weeks could be the most important in the oil market this decade. 🧵

The oil market is about to break. Not in price. In availability. Jeffrey Currie 🆔++ on CNBC yesterday and the market still isn’t listening. “It’s not the price of oil that matters here. It’s the availability of oil.” A thread on why the next few weeks could be the most important in the oil market this decade. 🧵

Qasem Al-Ali

37,843 просмотров • 2 месяцев назад

The real price of oil may be hiding in plain sight. Economist & Investment Strategist Philip Pilkington argues the physical crack spread tells a very different story from headline crude prices. Refinery margins suggest the market is still behaving as though oil costs roughly $100 to $110 a barrel, even as futures point much lower. In Pilkington's view, physical demand is exposing what financial markets are obscuring. Philip Pilkington

The real price of oil may be hiding in plain sight. Economist & Investment Strategist Philip Pilkington argues the physical crack spread tells a very different story from headline crude prices. Refinery margins suggest the market is still behaving as though oil costs roughly $100 to $110 a barrel, even as futures point much lower. In Pilkington's view, physical demand is exposing what financial markets are obscuring. Philip Pilkington

Mario Nawfal

78,365 просмотров • 21 дней назад

The oil price you see online is what’s called the futures market. It’s paper trading. The physical price—what refiners actually pay for the actual barrels of oil being delivered today—just hit $141. That’s a $32 gap. The Chevron CEO has even said that the futures market is based on a perception and just a little bit of information. The last time the physical price was this high was back in 2008 after Bush’s incompetence sent us into the Great Recession. You’re watching the wrong numbers.

The oil price you see online is what’s called the futures market. It’s paper trading. The physical price—what refiners actually pay for the actual barrels of oil being delivered today—just hit $141. That’s a $32 gap. The Chevron CEO has even said that the futures market is based on a perception and just a little bit of information. The last time the physical price was this high was back in 2008 after Bush’s incompetence sent us into the Great Recession. You’re watching the wrong numbers.

Dittie

35,312 просмотров • 3 месяцев назад

🇺🇸🇮🇷 The crude market sits in backwardation 5% of the time. It has not flipped back. Professor Steve Hanke breaks down what the forward curve is actually telling us about global supply. "If a market is in backwardation, that means that inventories are very scarce and people are trying to borrow from the future and resupply shorts of short inventories." The market started this nearly flat. Something changed it. It hasn't changed back. Steve Hanke

🇺🇸🇮🇷 The crude market sits in backwardation 5% of the time. It has not flipped back. Professor Steve Hanke breaks down what the forward curve is actually telling us about global supply. "If a market is in backwardation, that means that inventories are very scarce and people are trying to borrow from the future and resupply shorts of short inventories." The market started this nearly flat. Something changed it. It hasn't changed back. Steve Hanke

Mario Nawfal

50,112 просмотров • 18 дней назад

Oil is down, and down big. The headlines make it sound obvious. Iran peace deal, supply normalizing, the war premium coming out. But the rest of the markets are saying something very different. The clean story makes sense. Iran deal appears, crude sells off. The fundamental value of oil is closer to 50 a barrel than 150. But if this were only supply normalizing, the oil curve would stay in backwardation. The market would still want barrels today. It is not. Backwardation is vanishing. The front of the curve is about 80 cents from contango. The three-month spread has collapsed from around 30 to just over 2. Contango is what a glut looks like in the futures market. And the curve is heading there fast. Then the IEA cut its 2026 demand growth forecast by about 700,000 barrels a day. It warned of a major supply overhang in 2027. That is not supply. That is demand breaking. Inflation markets agree. TIPS break-evens are collapsing. The 5-year is down about 40 basis points in a month, back near its weakest levels of the year. That is not a market afraid of inflation. It is a market pricing the oil shock as temporary and demand-destructive. The Treasury curve says the same. The 2-year jumped to about 4.2%. The 10-year barely moved. The 2s10s spread flattened to about 29 basis points. The front end is taking the Fed's hawkish dots seriously. The long end refuses to price growth. That is not an inflation signal. It is a policy-mistake signal. Because the Fed is looking at this exact setup and seeing inflation. Its dots moved up about half a point from March. A majority of the FOMC now thinks it might have to hike for oil. We have seen this movie. Trichet and the ECB hiked into weakness in 2008 and again in 2011, mistaking a commodity shock for real inflation. It was a disaster both times, and the markets told them so in advance. Here is what they keep missing. Oil is a relative price shock, not inflation. For it to become inflation you need it to spread. Wages chasing prices. Businesses with pricing power. Demand strong enough to absorb higher costs. None of that is happening. So falling oil is not automatically bullish. Cheaper oil because supply came back is good. Cheaper oil because the economy is breaking is not. The market is pricing both, and the curve is where the fight shows up. Oil down by itself is good news. Oil down with flattening curves, collapsing break-evens, and demand downgrades is something else entirely.

Oil is down, and down big. The headlines make it sound obvious. Iran peace deal, supply normalizing, the war premium coming out. But the rest of the markets are saying something very different. The clean story makes sense. Iran deal appears, crude sells off. The fundamental value of oil is closer to 50 a barrel than 150. But if this were only supply normalizing, the oil curve would stay in backwardation. The market would still want barrels today. It is not. Backwardation is vanishing. The front of the curve is about 80 cents from contango. The three-month spread has collapsed from around 30 to just over 2. Contango is what a glut looks like in the futures market. And the curve is heading there fast. Then the IEA cut its 2026 demand growth forecast by about 700,000 barrels a day. It warned of a major supply overhang in 2027. That is not supply. That is demand breaking. Inflation markets agree. TIPS break-evens are collapsing. The 5-year is down about 40 basis points in a month, back near its weakest levels of the year. That is not a market afraid of inflation. It is a market pricing the oil shock as temporary and demand-destructive. The Treasury curve says the same. The 2-year jumped to about 4.2%. The 10-year barely moved. The 2s10s spread flattened to about 29 basis points. The front end is taking the Fed's hawkish dots seriously. The long end refuses to price growth. That is not an inflation signal. It is a policy-mistake signal. Because the Fed is looking at this exact setup and seeing inflation. Its dots moved up about half a point from March. A majority of the FOMC now thinks it might have to hike for oil. We have seen this movie. Trichet and the ECB hiked into weakness in 2008 and again in 2011, mistaking a commodity shock for real inflation. It was a disaster both times, and the markets told them so in advance. Here is what they keep missing. Oil is a relative price shock, not inflation. For it to become inflation you need it to spread. Wages chasing prices. Businesses with pricing power. Demand strong enough to absorb higher costs. None of that is happening. So falling oil is not automatically bullish. Cheaper oil because supply came back is good. Cheaper oil because the economy is breaking is not. The market is pricing both, and the curve is where the fight shows up. Oil down by itself is good news. Oil down with flattening curves, collapsing break-evens, and demand downgrades is something else entirely.

Jeffrey P. Snider

32,892 просмотров • 1 месяц назад

🇺🇸 Tucker: The oil market is clearly manipulated "There was a time this month, with the Strait basically still closed, when oil, as priced in the Brent crude market, was cheaper by a few cents per barrel than it was before the war started." Referring to the Iran war and repeated threats to the Strait of Hormuz, he argued oil prices should have surged far higher if they truly reflected supply and demand. Instead, financial markets are being driven by speculation, insider trading, and powerful interests. Source: Tucker Carlson / Writer: Monica

🇺🇸 Tucker: The oil market is clearly manipulated "There was a time this month, with the Strait basically still closed, when oil, as priced in the Brent crude market, was cheaper by a few cents per barrel than it was before the war started." Referring to the Iran war and repeated threats to the Strait of Hormuz, he argued oil prices should have surged far higher if they truly reflected supply and demand. Instead, financial markets are being driven by speculation, insider trading, and powerful interests. Source: Tucker Carlson / Writer: Monica

Mario Nawfal

73,720 просмотров • 1 день назад

Oil prices rose nearly $3 a barrel after President Trump said the US is going to attack Iran 'very hard' if no peace deal is finalized and as market data showed a larger-than-expected drawdown in US crude inventories

Oil prices rose nearly $3 a barrel after President Trump said the US is going to attack Iran 'very hard' if no peace deal is finalized and as market data showed a larger-than-expected drawdown in US crude inventories

Reuters

53,264 просмотров • 1 месяц назад

Get out of the stock market. A few companies control all the money in the world. BlackRock. Vanguard. Blackstone. They know when the bubble bursts. You don't. They pump. You buy. They dump. Oil futures are the proof. The Strait of Hormuz has been closed for three months. Oil should be at $200. It is not. The market is rigged. The house always wins. Get out.

Get out of the stock market. A few companies control all the money in the world. BlackRock. Vanguard. Blackstone. They know when the bubble bursts. You don't. They pump. You buy. They dump. Oil futures are the proof. The Strait of Hormuz has been closed for three months. Oil should be at $200. It is not. The market is rigged. The house always wins. Get out.

Predictive History

287,908 просмотров • 22 дней назад

BARTIROMO: Do you think oil prices will be lower before the midterm elections? BESSENT: Ahh -- I think oil prices, we can see in the futures market that oil prices are already lower 3 months, 6 months, 9 months out (Not a yes!)

BARTIROMO: Do you think oil prices will be lower before the midterm elections? BESSENT: Ahh -- I think oil prices, we can see in the futures market that oil prices are already lower 3 months, 6 months, 9 months out (Not a yes!)

Aaron Rupar

230,038 просмотров • 2 месяцев назад

NEWS: Oil prices PLUMMETED this morning after the U.S. and Iran agreed to a peace deal Sunday, with crude oil crashing to $80 a barrel on news that the Strait of Hormuz will reopen. Gas prices are now expected to begin falling at the pump within days. Crude oil benchmarks dropped more than 5% in early trading. West Texas Intermediate (WTI) fell to around $80 per barrel — its lowest level in recent months — while Brent crude, the global benchmark, traded near $82–$84.

NEWS: Oil prices PLUMMETED this morning after the U.S. and Iran agreed to a peace deal Sunday, with crude oil crashing to $80 a barrel on news that the Strait of Hormuz will reopen. Gas prices are now expected to begin falling at the pump within days. Crude oil benchmarks dropped more than 5% in early trading. West Texas Intermediate (WTI) fell to around $80 per barrel — its lowest level in recent months — while Brent crude, the global benchmark, traded near $82–$84.

RedWave Press

20,884 просмотров • 1 месяц назад

🚨🇺🇸🇮🇷 The futures market is trading as if peace is days away, but even if a deal is signed tomorrow, we are six months from any normalization of the oil supply. Stephen Schork says the globe has lost a billion barrels of oil since the blockade began. The tanker market is screaming shortage while futures traders react to Trump tweets. Those are two completely different realities. Declogging the Persian Gulf takes until end of year at best. Stephen Schork Azi

🚨🇺🇸🇮🇷 The futures market is trading as if peace is days away, but even if a deal is signed tomorrow, we are six months from any normalization of the oil supply. Stephen Schork says the globe has lost a billion barrels of oil since the blockade began. The tanker market is screaming shortage while futures traders react to Trump tweets. Those are two completely different realities. Declogging the Persian Gulf takes until end of year at best. Stephen Schork Azi

Mario Nawfal

135,867 просмотров • 1 месяц назад

SECRETARY RUBIO: For the first time in decades, Venezuela is now selling their oil in the global market at full market price. The money is coming back to Venezuela and being spent for the benefit of the Venezuelan people. 💪

SECRETARY RUBIO: For the first time in decades, Venezuela is now selling their oil in the global market at full market price. The money is coming back to Venezuela and being spent for the benefit of the Venezuelan people. 💪

Department of State

537,492 просмотров • 3 месяцев назад

Everyone thinks the oil story is simple: not enough supply, that's why prices are high. But look at the futures curve right now. It's flattening into contango, and not down the road, right at the front. August. September. That is the market pricing in too much oil, today, not in some far off normalization. Here is the part that should stop you. If supply hasn't fully come back, and the curve is still saying there's a glut, the math only works one way. Demand is falling faster than supply is recovering. This was never a supply story. It's a demand story wearing a supply costume.

Everyone thinks the oil story is simple: not enough supply, that's why prices are high. But look at the futures curve right now. It's flattening into contango, and not down the road, right at the front. August. September. That is the market pricing in too much oil, today, not in some far off normalization. Here is the part that should stop you. If supply hasn't fully come back, and the curve is still saying there's a glut, the math only works one way. Demand is falling faster than supply is recovering. This was never a supply story. It's a demand story wearing a supply costume.

Jeffrey P. Snider

24,348 просмотров • 12 дней назад

🚨🇺🇸 🇮🇷 MARKET REALITY: THE SPOT PRICE EXPLOSION Professor of applied economics at Johns Hopkins University, Steve Hanke, warns that a Houthi closure of the Suez Canal would make a bad situation much worse. Steve Hanke notes the physical shortage of oil is driving spot market prices much higher than futures. Professor Hanke expects the paper market to be "mugged by reality" as it rushes to match physical prices. As a veteran trader, Professor Steve Hanke advises that things are destined to get worse before they get better. Steve Hanke

🚨🇺🇸 🇮🇷 MARKET REALITY: THE SPOT PRICE EXPLOSION Professor of applied economics at Johns Hopkins University, Steve Hanke, warns that a Houthi closure of the Suez Canal would make a bad situation much worse. Steve Hanke notes the physical shortage of oil is driving spot market prices much higher than futures. Professor Hanke expects the paper market to be "mugged by reality" as it rushes to match physical prices. As a veteran trader, Professor Steve Hanke advises that things are destined to get worse before they get better. Steve Hanke

Mario Nawfal

61,088 просмотров • 3 месяцев назад

There is a near-perfect correlation between US oil prices and US CPI inflation, as shown in our below analysis. As WTI crude surges above $112/barrel, we believe the US economy is bracing for 3.5%+ CPI inflation, particularly if current prices persist through April. Asset owners will be the only winners in the long-run.

There is a near-perfect correlation between US oil prices and US CPI inflation, as shown in our below analysis. As WTI crude surges above $112/barrel, we believe the US economy is bracing for 3.5%+ CPI inflation, particularly if current prices persist through April. Asset owners will be the only winners in the long-run.

The Kobeissi Letter

525,001 просмотров • 3 месяцев назад

Global oil prices haven't even hit $150 a barrel, though analysts had predicted the price of crude oil could rise as high as $200 a barrel when the US and Israel went to war with Iran at the end of February. Energy editor Dmitry Zhdannikov explains why

Global oil prices haven't even hit $150 a barrel, though analysts had predicted the price of crude oil could rise as high as $200 a barrel when the US and Israel went to war with Iran at the end of February. Energy editor Dmitry Zhdannikov explains why

Reuters Business

94,100 просмотров • 2 дней назад

What the oil market isn't answering: why are Brent futures near pre-war levels when only 39 ships moved through Hormuz in the last 24 hours. Roughly a 3rd of normal traffic? Economist Steve Hanke says the market is pricing a fantasy. When oil is genuinely scarce, markets go into backwardation; spot prices above futures because people are borrowing from the future to cover today's shortage. That's the normal signal. Right now, with inventories near record lows and Hormuz still running at a 3rd of capacity, the forward curve has gone flat instead. Hanke calls that anomalous, plainly disconnected from the physical reality on the water. Refined products are telling the honest story: gasoline and diesel are still showing real backwardation, meaning real shortages. The crude price is not. On the MoU, Hanke's blunty calls it a surrender document. Trump needed out because continued closure meant economic catastrophe. Netanyahu is reportedly pushing to reopen the fight. And on the hypocrisy of Washington's "no country can charge Hormuz fees" position. Turkey raised Bosphorus transit fees 15% on July 1st, fully legal under the Montreux Convention. Hanke's suggestion: settle Hormuz the same way, a formal multilateral convention among Gulf states and major powers. Is crude simply wrong right now, or is there supply nobody's tracking that explains the disconnect? Steve Hanke

What the oil market isn't answering: why are Brent futures near pre-war levels when only 39 ships moved through Hormuz in the last 24 hours. Roughly a 3rd of normal traffic? Economist Steve Hanke says the market is pricing a fantasy. When oil is genuinely scarce, markets go into backwardation; spot prices above futures because people are borrowing from the future to cover today's shortage. That's the normal signal. Right now, with inventories near record lows and Hormuz still running at a 3rd of capacity, the forward curve has gone flat instead. Hanke calls that anomalous, plainly disconnected from the physical reality on the water. Refined products are telling the honest story: gasoline and diesel are still showing real backwardation, meaning real shortages. The crude price is not. On the MoU, Hanke's blunty calls it a surrender document. Trump needed out because continued closure meant economic catastrophe. Netanyahu is reportedly pushing to reopen the fight. And on the hypocrisy of Washington's "no country can charge Hormuz fees" position. Turkey raised Bosphorus transit fees 15% on July 1st, fully legal under the Montreux Convention. Hanke's suggestion: settle Hormuz the same way, a formal multilateral convention among Gulf states and major powers. Is crude simply wrong right now, or is there supply nobody's tracking that explains the disconnect? Steve Hanke

Mario Nawfal

290,097 просмотров • 18 дней назад

The situation in the Strait of Hormuz have spiked global oil prices and sparked concern of potential recession. Brent crude is now more than 100 dollars a barrel up from around 70 before the crisis began. But how is the price of oil decided? Al Jazeera’s Ama Boateng explains.

The situation in the Strait of Hormuz have spiked global oil prices and sparked concern of potential recession. Brent crude is now more than 100 dollars a barrel up from around 70 before the crisis began. But how is the price of oil decided? Al Jazeera’s Ama Boateng explains.

Al Jazeera English

52,264 просмотров • 4 месяцев назад