“A funny thing happened to the oil market six years ago: The benchmark U.S. crude price plunged by nearly $56 a barrel in one day. The oddest part is that it fell by more than the headline oil price. A trader could have paid negative $37.63 a barrel in the futures market.
That seems completely different than what's happening now, with futures briefly hitting almost $120 on Monday. There are some parallels worth thinking about, though.
By early 2020, the oil market was glutted after a Saudi-Russian battle for market share. Then Covid-19 brought global travel to a halt, crushing demand. Oil-exporting countries agreed that April to slash output. It was too late for the oversupplied U.S. market, which went negative a week later.
People think of a WTI oil futures contract as a purely financial instrument, but it legally requires delivery of 1,000 barrels of light, sweet crude to Cushing, Okla. With every tank filled to the brim back then, owners of any spare storage could have charged an outrageous sum -- the reason you got paid to buy the contract.
Today's crisis also involves overflowing storage. Gulf states, unable to dispatch tankers because of safety concerns and lack of insurance, have filled nearly everything and been forced to reduce production despite attractive prices on the screen. There are still plenty of barrels in the world, just in the wrong place.
When May futures went negative six years ago, November contracts were $31.66. That left the market in sharp contango -- distant prices well above those for immediate delivery. A speculator with access to reasonably priced storage could have made a guaranteed profit by buying 1,000 physical barrels cheaply and immediately selling a contract expiring months later.
On Monday morning, the opposite held: extreme backwardation. The difference between U.S. futures for April delivery and those expiring in September got as high as $35 a barrel. By Tuesday morning, that gap had collapsed to about $13 as the market digested Trump's comment that the war would end "very soon."
That rapid reversal seems like the market had been betting on a prolonged war and then quickly reassessed its timeline. Back in 2020, when the market's sharp contango quickly corrected itself, it seemed like investors rightly concluded that the pandemic's effects would ease within months.
Both are partly true, but pundits not familiar with commodity markets can read too much into big moves. A buyer who needed oil had to pay a hefty "convenience yield" this week. A seller awash in barrels back in 2020 was practically giving them away.
In both cases, speculators pounced on a rare and profitable pricing anomaly that can't last for very long. Trump's comments provided the spark this time, but distant futures have to converge with spot prices eventually.
When there's a physical bottleneck in the market, weird things happen. Just don't assume the futures market is able to tell the future.” [1]
1. From Feast to Famine in the Oil Market. Jakab, Spencer. Wall Street Journal, Eastern edition; New York, N.Y.. 11 Mar 2026: B12.
Komentarų nėra:
Rašyti komentarą