Contango

RECENT NEWS
SeekingAlpha  Aug 26  Comment 
By Prudent Finances: By Ivan Y. In one of my first articles on Seeking Alpha, I suggested that U.S. Oil Fund (NYSEARCA:USO) was a sucker's bet due to contango in WTI crude oil. Contango is when the near-month contracts for WTI oil are cheaper...
Reuters  Aug 20  Comment 
Oil traders have begun fixing tankers to take North Sea, West African and Arab crudes to South Africa for storage, hoping for a repeat of the multi-million dollar bonanza they reaped in 2008-2009.
DailyFinance  Aug 12  Comment 
Contango Oil & Gas Company (NYSE MKT:MCF) (“Contango”) announced today its financial results for the three months ended June 30, 2014 and provided an operational update. Second Quarter 2014 Highlights Production of...
SeekingAlpha  Jul 28  Comment 
By Nathan Buehler: In this article, we are going to use the same parameters of a contango and backwardation strategy we discussed with iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA:VXX). Today we are going to review how this strategy would...
SeekingAlpha  Jul 23  Comment 
By Jeremy Schwartz: By Rick Harper On the back of a resurgence in Chinese economic data and rising geopolitical risk in Eastern Europe and the Middle East, increases in global commodity prices have reinvigorated investor interest in...
Reuters  Jul 22  Comment 
(Corrects gasoil stocks in penultimate paragraph to 4.19 million tonnes)
Commodity Online  Jul 19  Comment 
Barclays said in a weekly report that it expects crude prices to average $11/bbl over Q3. Global oil demand is expected to swing higher by 1.4 mn barrels per day quarter-on-quarter on a combination of seasonal patterns and cyclical recoveries.
Reuters  Jul 16  Comment 
* Floating storage more likely prospect for gasoil than crude
Commodity Online  Jul 16  Comment 
The contango situation seen in Brent Crude Oil futures could prevail for some more time and could impact other markets like WTI crude oil. The collapse of brent crude term structure from a healthy level of backwardation to super contango could be...
Commodity Online  Jul 12  Comment 
Barclays noted in its weekly report that prompt month crude prices were particularly weak as softness in the physical market pulled the August and September contracts into contango (far month contracts priced higher than near month contracts).




 

This article refers to a futures concept. For the oil & gas company, see Contango Oil & Gas Company (MCF).

Contango means the price of a commodity for delivery at a future date is significantly higher than the current or "spot" price, which makes it profitable for companies to store the commodity and enter into contracts to sell futures contracts on the commodity, even after accounting for storage costs and opportunity cost of capital (i.e. money tied down on the inventory not earning a return).

The situation persists untill the futures prices come down or current prices go up or the cost of storage becomes very high.

This situation is also referred to as an upward sloping forward curve.

The opposing market condition to contango is backwardation.

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