Oil Markets in Backwardation

Friends,

JP Morgan made a call last week for clients to re-enter the commodities markets based on, among other things, the unusual developments in the oil futures markets. Normally futures prices rise as you go forward to distant contracts. When short-term contracts rise higher than long-term contracts it is called backwardation and only happens if physical supply is running very tight. Backwardation is what is happening right now and the last time it happened oil doubled in price in a year back in 2008. I hope that doesn’t happen again, but oil has already risen $6.00 since I read the article a week or so ago and has broken through the important resistance level of $100 a barrel. Here is the link for the full read.

http://www.zerohedge.com/news/2013-07-01/jpmorgan-comes-out-first-overweight-call-commodities-september-2010

Have a great day

Kevin