The spread between front-month oil futures and contracts for later delivery on the New York Mercantile Exchange (see Fig. 1) has widened dramatically this month. (See Fig. 2)
The widening contango frequently portends a rise in inventories. For example, in Fig. 3, it can be seen that when the discount for fronth-month crude to second-month crude widened to near $4 a barrel earlier this year, inventories jumped to 19-year highs. The relationship between inventories and the outright futures price can be seen in Fig. 4.
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