Friday January 12, 2018
In the latest edition of the Numbers Report, we’ll take a look at some of the most interesting figures put out this week in the energy sector. Each week we’ll dig into some data and provide a bit of explanation on what drives the numbers.
Let’s take a look.
1. Timespreads bolsters oil prices
(Click to enlarge)
- Some geopolitical flashpoints, inventory drawdowns and rising demand are pushing oil prices to their highest point in years. Yet the futures market also offers some validation for higher prices.
- Brent one-year timespreads continue to climb, rising deeper into backwardation territory. Backwardation – when front-month contracts trade at a premium to futures dated further out – signals bullishness in the market.
- Oil traders are willing to pay nearly a $5 premium for oil in February compared to oil 12 months from now. The backwardation is at its most extreme point since 2014.
- From a trading standpoint, buying contracts is profitable because each month the trader rolls into a cheaper contract.
- “Being long oil gives a positive annual return, even if oil stays flat,” Giovanni Staunovo, a commodity analyst at UBS Group AG, told Bloomberg. “The last time you could say that was in 2014.”
- The result is investors piling into long bets on crude oil, which is helping to push up prices.
2. Bullish sentiment seen across commodities