by Jeffrey P. Snider
Alhambra Partners
It isn’t just that oil prices are falling, that is only one dimension of the full oil spectrum concentrating in the spot market. The more interesting and important information is contained within the whole WTI futures curve. As “dollar” funding pressure has built up since the front month peak on June 8, it has steepened the curve into deeper contango; raising expectations for even more crude heading toward storage in the near future.
That process continues, but in the past few weeks the entire WTI curve has again been influenced by the front. As we have seen in prior episodes, the “dollar” “wins” by pulling down the shorter maturities first so that those expectations for storage become paramount at the back end (so much oil inventory reduces the willingness of anyone who might be willing to buy and store crude to sell at a future date, therefore a lower price further into the future).