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April 04, 2019 | by Joel Fingerman

Dear Joel:

Energy

Since March 6, 2019, front-month crude oil prices have increased more than $6, from $56.22 to $62.46 per barrel. Chart 1 of the forward curves for those two dates also shows the contango coming out of the market to a primarily backwardated market. As of March 6, the contango was over two dollars from the April contract at $56.22 to the December contract at $58.61 (red line).

As of April 3, the contango was only nine cents from the May contract at $62.46 to the July contract at $62.55; after that, the forward curve is backwardated. Backwardation supports rising prices, and, in turn, rising prices generally increase backwardation. The forward curves are indicating higher prices.

Chart 1


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