Views on commodities and energy
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.
The drop in U.S. oil demand against year-ago levels has begun to slow as data is compared with weak levels from 2008, when consumption slowed due to the slumping economy and the high fuel prices seen during the first half of the year.
The graph shows the change in U.S. demand over the four-week period from levels from the previous year.