Commodity Corner

Views on commodities and energy

Oil Market Contango Widening

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0709-contango-fig-11The 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)0709-contango-fig-2The 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. 0709-contango-fig-30709-contango-fig-41

Open Interest in U.S. Crude Oil Futures

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Open interest and trading volumes in commodity futures markets have shown some resilience at the start of 2009 despite the dramatic price slides triggered by the economic downturn.

In the fourth quarter of 2008, open interest in U.S. crude oil futures fell to levels not seen since mid-2006 as the global economic crisis hit fuel demand and sent prices tumbling, before rebounding.

U.S. Crude Futures Contracts Held By United States Oil Fund in 2008

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The United States Oil Fund LP exchange traded fund has built up a large position in crude oil over the past four months, accounting for nearly a quarter of the open interest in the March contract on the NYMEX last week.

Following is a list of the tentative 2009 oil futures contract roll dates for the fund, according to United States Oil Fund’s Website.

Commodities roundup: Oil rally unleashed, how much more left

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Three months of U.S. crude oil futures“Short squeeze, crude expiration — that’s it in a nutshell.”

So says Tom Knight of Truman Arnold in Texas of the near 16% surge in U.S. crude for October to $120.92 a barrel. Among other factors in the energy markets today:

Commodities Today: Gold rally, gasoline supplies and the politics of speculation

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Gold is the fashionOn the plate today:

    Gold prices posted their biggest one-day rise in absolute terms since 1980 As financial worries spread, Russia halted stock and bond trading in a response to the worst market falls since 1998.  The White House may decide as soon as this afternoon whether to ask members of the International Energy Agency to release emergency gasoline and diesel fuel inventories into the U.S. market, Energy Sec. Sam Bodman tells reporters Chinese Premier Wen Jiabao called a meeting of the cabinet to back plans for a national inspection of milk products, the UK Press Association reports.

A news website devoted to American politics picks up the threads in the oil market speculation story. Politico outlines the scope of the lobbying by the airlines-to-truckers backed “Stop Oil Speculation Now Coalition” and its new sparring partner, the Wall Street-backed “Coalition to Protect Competitive Markets”.

Regulation is in the air. Politico notes that gas stations owners have put out signs calling for customers to urge Congress to “take action against speculators”

Commodities Agenda: Ike idles U.S. Gulf energy industry

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Hurricane Ike on ThursdayOil prices are rising as Hurricane Ike moves within 24 hours of striking the coast near Houston with a possible 20-foot (6-meter) wall of water.  A slew of oil refineries located in Galveston Bay that account for around 12 percent of U.S. capacity were also in the storm’s likely path. Weather forecasters at Planalytics saw “major and long-term damage likely at the major refining cities.”

Ike, the federal response and updates of output will set the tone for the day. Here’s a look at output shut in the Gulf and list of oil companies shut and some other events in commodities: