Insight

Oil prices: unwinding contango storage in the US

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Report summary

A contango futures market provides risk management companies (RMC) with the economic incentive to hold inventory in an oversupplied market. Buying and storing physical crude oil in Cushing, OK while selling deferred WTI futures contracts is an excellent example of crude oil contango storage. As the crude oil market rebalances and the risk of holding inventory is reduced, the difference between physical crude oil price and the deferred futures contract price will decrease.

What's included

This report contains

  • Document

    Oil prices: unwinding contango storage in the US

    PDF 304.40 KB

Table of contents

  • Summary
  • Example of Q1 2015 contango storage play, Mark to Market performance and resulting profitability
  • Daily Mark-to-Market (MTM) Accounting

Tables and charts

This report includes 3 images and tables including:

Images

  • Building and Liquidating the Contango Position
  • Q1 2015 Contango Storage
  • Mark to Market (MTM)

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