* November 25, 2009 * Contango
pipeline added to display of NOAA
To understand the effect of contango
and backwardation, we must first explain how the typical oil or natural gas ETF functions.
But the contango
is also narrowing along the rest of the curve, including at more deferred dates where idiosyncratic factors should have much less influence.
Conversely, spreading a fund's assets over several month's contracts minimizes the negative effects of contango
. However, there is an upside and downside with both strategies.
Similarly, the US WTI contango
narrowed sharply from $2.55 to $1.20/b (M1--M3) as crude stock draws took place amid increasing refining activities and signs of slowing production helped clean up surplus crude.
"Producers globally are struggling to find buyers for their crude, which is reflected in the contangos
in the Brent and WTI futures curves," Barclays said in a note.
Three years ago the Brent contango
widened to the point where oil companies and trading houses could make money by buying crude oil, storing it at sea and then selling later.
's Chairman and Chief Executive Officer, said, 'We are pleased about the opportunity to be partners once again with Joe Greenberg and Alta Resources.
"The read through is that although the WTI forward curve contango
has increased lately, it is still insufficient to support storage at present levels."
Although the crude oil market structure did not provide the same level of opportunity to earn contango
profits in the first half of 2010 as compared to 2009, we are pleased with the growth we have experienced in our ratable businesses, said Michael J.
But a little financial dance called the contango
may ease some of the pressure on Iran to cut prices.
The forward contango
decreased in the month of June with the 1st/2nd month spread at US$0.78, a decrease of US$0.15 from the previous month.