The cost of WTI crude for immediate delivery is higher than forward contracts for the first time since the start of the financial crisis in the fall of 2008, the Financial Times reported Tuesday. Backwardation points to a close supply and demand balance. “The speed and magnitude of the shift into backwardation has left the oil market reeling,” the FT reported. “Trade volumes at Nymex, the New York-based exchange home of WTI, spiked on Monday to the highest level in nearly six months as macro hedge funds that were betting that an economic crisis would bring a deep contango exited their trades en masse.”
The move into front-month oil futures this week caught many traders by surprise, Reuters reported. “The shifts highlight a change in sentiment, said John Kilduff at Again Capital.
According to the Energy Information Administration, U.S. oil stocks have dropped around 8% year-over-year, falling to 332.9 million barrels.
U.S. Oil Fund
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Max Chen contributed to this article.