* November 2007 *
Contango obtains permit from Corps Regulatory
Thus, backwardation exists between M-1 and M-2 and
contango is present between M-2 and M-3.
In general, the end of a bear market has been accompanied by a narrowing of the
contango and then a shift into backwardation.
Because investing all of the funds proceeds in the following month's contract exposes the fund to greater
contango risk.
THE FUTURES MARKET STRUCTURE The
contango in the Brent, WTI and Dubai market structures narrowed over the month as demand continued to improve in all regions and the oil glut started to ease.
Brent's
contango between deliveries in March this year and a year later is currently around $10 per barrel.
The Dow Jones-UBS Roll Select Commodity Index, a version of the Dow Jones-UBS Commodity Index, aims to mitigate the effects of
contango on performance.
Nearby Brent prices have fallen below forward futures for the first time in almost a year, pushing the front of the price curve into
contango, a structure that is commonly associated with a weak and over-supplied market.
The consuming nations' release of reserves has sent Brent into
contango, with front-month Brent trading at a 17-cent discount to the September contract Friday, after closing Thursday at a 21-cent premium to the second month.
Contango Oil & Gas Company (NYSE Amex: MCF), a Houston-based, independent natural gas and oil company, is planning to invest up to USD20m over the next two years in a joint venture.
crude is in a
contango, meaning oil for immediate delivery is cheaper than supplies in the future, giving an incentive for the storage of crude.
Reflecting the weak sentiment in the Middle East market, the Dubai August/September intermonth spread widened to a discount of 85 cents on Wednesday, its steepest
contango in at least five months, Reuters data show.
