Brent crude futures move closer to backwardation on cold weather
03 December 2010 16:44 [Source: ICIS news]
LONDON (ICIS)--The Brent crude oil futures forward curve has moved closer to backwardation as the current cold weather in
The Brent futures market has seen a stronger increase at the front end of the forward curve as demand for prompt delivery has increased on the back of the current cold weather, pushing up the buying of oil products used to heat homes such as gasoil and LPG (Liquefied Petroleum Gas).
A backwardated structure in the futures markets suggests that supply of the physical underlying commodity is becoming tighter.
However, the analyst said that if the market moved into backwardation, it would probably be short-lived as it is driven by a momentary strong demand from the cold weather, as opposed to a structural and longer-lasting shortage of supply.
The opposite of backwardation is contango, which describes a market structure where the prompt trading month is lower in relation to the outer months.
At 15:50 GMT, the January Brent futures contract was trading at around $90.75, up $0.06 bbl from the previous close of $90.69/bbl, and only $0.02/bbl lower than the February contract of $90.77/bbl.
Meanwhile, the physical markets have seen an increase in the values of the differentials to the benchmark Dated value.
In the
However, the marker crude in the
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