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That's not what backwardation means. Backwardation means a recovery of supply is priced in. And we may well see those future "roll up" the curve if war contin
by evrydayhustling 5y ago
That's not what backwardation means. Backwardation means a recovery of supply is priced in. And we may well see those future "roll up" the curve if war continues to constrain supply. The high prices at the front of the curve are the ones we are experiencing, and they are both driving up the CPI directly (since oil is a component) and indirectly adding costs to other goods since you need actual oil, not oil futures, to undertake production.
- harambae 5y agoInvestopedia disagrees "Backwardation is when the current price of an underlying asset is higher than prices trading in the futures market."
- evrydayhustling 5y agoWe agree about the definition of backwardation. I am disagreeing with the post's statement that backwardation implies the invasion is "already priced in" to inflation, when at the time of writing they implied a rapid recovery. If you look at the curve since OP, you'll see it's is actually less backwardated than it's been all year (due to repeated releases from the US reserves). But long term futures are near their highest - suggesting a worse picture for impact on consumer prices over time. Source: traded oil futures professionally. Data you can watch: https://www.eia.gov/outlooks/steo/marketreview/crude.php https://www.eia.gov/outlooks/steo/marketreview/crude.php