Contango

RECENT NEWS
Financial Times  Apr 15  Comment 
Surpluses and markets in contango play a key role
Financial Times  Mar 17  Comment 
You never engage in a contango (storage) trade until the rate of return compensates you for your cost of storage/insurance
OilVoice  Mar 11  Comment 
Rig counts are falling but production is still up driving worry of an oversupplied market. Traders with contango in their eyes are leasing storage and hoarding excess oil in anticipation of higher fut
Financial Times  Mar 9  Comment 
Supertankers being leased as contango fails to live up to lucrative hopes
Reuters  Mar 9  Comment 
* Oil price recovery, flattening contango trigger storage sales




 

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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