Crude Oil Six-Month Calendar Spreads

Description

These charts plot historical prices for two grades of crude oil - West Texas Intermediate (WTI - bright orange curve) and Brent crude from the North Sea (light orange curve) against their respective 6-month calendar spreads.

Historical data are available from June 2, 2014.

The chart is interactive. You can click on any series in the legend to hide/show the data. You can also click on the chart and drag out a specific area you wish to zoom. Alternatively, use calendar filter to select a specific data range. Also, to print or download the chart, click on the "menu" button in the top right corner of the chart.

Update: every weekday + Sunday afternoon.

Source: CME Group, ICE, Bluegold Research calculations

Traders' Note

Calendar spreads cycle between backwardation and contango as the market alternates between periods of under- and over-supply, making spreads rather than spot prices the most useful indicator of market balance.

Backwardation (positive spread) is associated with periods of under-supply and falling inventories, while contango (negative spread) is associated with the opposite. In other words, forward curves become backwardated when supply is running low; conversely, contango tends to occur when there is a surplus. Backwardation incentivizes holders of inventory to release it due to the prevailing near-term premium price. Contango, on the other hand, incentivizes owners of storage facilities to increase inventory, thereby alleviating the supply glut. Contango, or when the forward price of Brent/WTI trades above the prompt price, usually encourages traders to buy options to store crude, which could lead to rising inventories.

Related charts: Crude Oil Forward Curves.