Harvey hurts crude oil re-balancing, but creates opportunities
The move to a backwardated curve in mid-August was seen as proof that Opec’s efforts were paying off, but Harvey has nipped this hope in the bud — for now, writes Clyde Russell
Launceston, Australia — Crude oil’s flirtation with backwardation has been hit by the market dislocations caused by Hurricane Harvey that is disrupting the US crude oil import, export and refining hubs along the Gulf of Mexico coast. Two weeks ago the Brent crude futures curve was backwardated, with the front-month contract commanding a premium over the following four months, but by the close on Wednesday, the global benchmark oil was once again mainly in contango, with the front-month at $50.86 a barrel, a discount of 27c a barrel to the six-month future. The very front of the curve was still in mild backwardation, with the second-month contract 13c cheaper than the front-month, and the third-month a mere 7c. On August 15, the front-month Brent future was at a premium of 17c to the second-month and 18c to the third. Backwardation is usually seen as a sign that the market is re-balancing and that prices are likely to head higher in future months. Backwardation, when the front-month ...
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