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Kaoboy Musings
Re: Oil-The Significance of Backwardation.

Re: Oil-The Significance of Backwardation.

It’s not the current price of forward prices that determines future spot prices, but rather it’s the SHAPE of the forward curve.

Michael Kao's avatar
Michael Kao
Feb 12, 2021
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Kaoboy Musings
Kaoboy Musings
Re: Oil-The Significance of Backwardation.
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With the curve backwardated $9 to ’23, history predicts that more often than not, much higher spot prices will follow.

Spent the day looking at historical contango-to-backwardation flips, and in 7 out of 11 such scenarios since 1988, spot prices were significantly higher in the following year.

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