Abandon hope all ye who enter here was the inscription written above the gates of Hell in Dante’s Divine Comedy.
Investors who decided to take a long position in commodity futures at the start of 2010 anticipating a global recovery, tightening supply-demand balances, and rising prices, could be forgiven a sense of despair.
Their risk-taking has been rewarded with range-bound prices and a contango eating deeply into returns. Most longs lost money in H1 2010.
Flagship U.S. oil prices have moved sideways for the last 12 months, while negative contango rolls ensured investors lost around 13 percent since the start of the year.
The problem is not confined to WTI, which has been likened by some analysts to a “chocolate teapot” because of its sensitivity to inventories around the delivery point at Cushing. An investment in Brent futures, which reflects the seaborne international oil market more faithfully, according to analysts, is down just over 9 percent on a total return basis.