West Texas Intermediate futures have gone into “backwardation” for the first time since 2008 on Monday as trading volume spiked, Dow Jones Newswires reported. Backwardation occurs when futures prices are cheaper than the spot price. The opposite scenario is known as “contango.” [Commodity ETFs: Understanding Contango]
“We come from a situation where just a couple of weeks ago investors were worried about recession…and a lot of hedges were brought in to protect against that. We’re seeing a lot of those hedges unraveling,” said Ole Hansen at Saxo Bank in the Dow Jones report. “WTI has taken the brunt of whatever those hedges have been and those hedges are being pulled back at the moment.”
The oil ETF was up 1.6% in early trading Tuesday.
U.S. Oil Fund
