Contango - Futures Price and the 'Bid for Storage'
The shape or time structure of the futures market is a powerful, real-time market signal that can complement fundamental supply/demand analysis and improve short term price forecast. The futures market discounts risk; the risk of supply shortages and the risk of high inventories and storage containment. Backward futures markets are consistent with a demand pull out of inventory while contango markets are consistent with a supply push into inventory.
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Contango Futures Market – The economic incentive to hold excess inventory