Following OPEC’s agreement to cut prodiction for the first time in 8 years, front-end prices have spiked (above $50) but perhaps more notable is the unusual ‘stability’ in the crude curve around $54 from July 2017 to Nov 2019.
For the first time since October 2014, the belly of the crude curve is in backwardation (far-months cheaper than near-months).
WTI Dec. 2017 contract was trading at -$1.35 discount to Dec. 2018 at market open yesterday; has now flipped to premium, or backwardation…
Perhaps of note is that the backwardation in Oct 2014 seemed to catalyze an acceleration in the plunge in crude prices but for now we note that hopeful bulls eying a return to old norms may be disappointed as so much of the medium-term appears hedged and wedged.
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