Welcome to NexusFi: the best trading community on the planet, with over 150,000 members Sign Up Now for Free
Genuine reviews from real traders, not fake reviews from stealth vendors
Quality education from leading professional traders
We are a friendly, helpful, and positive community
We do not tolerate rude behavior, trolling, or vendors advertising in posts
We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community. It's free for basic access, or support us by becoming an Elite Member -- see if you qualify for a discount below.
-- Big Mike, Site Administrator
(If you already have an account, login at the top of the page)
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals, U308 and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,060 since Dec 2013
Thanks Given: 4,410
Thanks Received: 10,226
Your right the market was backwardated back in June 2014 when they market peaked, but is in contango now. It switched from backwardation to contango at the end of October 2014 when crude dropped below $80.
While you are correct about the crude light oil market currently being in Contango, the last contract roll for Brent was actually in Backwardation, at least it was when I rolled my contracts from Feb to March on Jan 13, 2016.
For the other posters,
Fattails has a very good explanation of this topic for those who are interested and want to learn more - one can search for his posts.
As an alternative to trading CL - Currently, I am using CL prices as a trigger to enter my trades, but I am actually trading Brent due to the cost of the Contango on CL - as it penalizes those who are holding long positions. Not only does Brent have much closer prices (using recent historical prices that is) for rolling to forward contracts than CL, during this last rollover period, the Backwardation actually allows you to get a lower price when rolling existing contracts forward - rather than pay the $1.20 or so for CL. Just a thought...
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals, U308 and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,060 since Dec 2013
Thanks Given: 4,410
Thanks Received: 10,226
Your timing was perfect. Market was in contango except for the last two days of the Feb contract (Jan 13 & 14). March is currently 78c discount to April.
Great points @kayaktri. Contango is less steep in Brent than in CL, hence the negative roll yield will be less.
March Brent & WTI are trading close to parity, which combined with the different contango's means that July Brent is trading at a almost $1.50 discount to July CL. If I was a crude buyer, July Brent @ 34 looks more attractive to me than March CL @ 31 - but I'm not a crude buyer I'm a spread trader.