Not sure but I would guess that delivery is an issue. If longs can't stand for delivery arb beomes impossible and the contract is broken. Less likely for this to happen where there are multiple delivery points. Bone; you cite bearish fundamentals for the abberations in the crude spreads. Not reasonable, this is not the first commodity to have bearish fundamentals but the only spread I can remember to go beyond carry. If I am wrong please cite an one of the "many" examples. Regards, local
Aluminum and copper. If there was storage available, the contango gets arbed back towards backwardation. Bearish front end of the curve also explains WTI vs. Brent in the front months.
In terms of OP's original question, I gave examples in real time pricing quotes from my trading platform in the live markets of spread liquidity exceeding flat price futures liquidity at the best market bid and offer. Not sure why you insist on highjacking the OP's thread regarding liquidity. Metals, energy, softs, interest rates - all with different forward pricing curves.
local, maybe you should stay on point and provide a legitimate explanation regarding the OP's original question - "broken" or not, the CL calendar is more liquid at the bid and offer than the flat prices futures, and like I demonstrated in the live market the same is true for most other market you can think of like gold, corn, eurodollars, and just about any other futures contract you could mention, 'broken' beyond how you calculate full cost of carry or not.
Bone, I am sorry if I have embarrassed you in any way, however I think you were the one who questioned the term " broken". I understand that this is a part of your business, but really, if you can't recognize what is happening with crude how can you give guidance to "clients"? Some of your comments really expose your limited knowledge of commodity futures e.g. bearish fundamentals responsible for moving a spread past full carry. That is complete nonsense. Ridiculous. My intent was not to highjack this thread, simply to share my experience. Regards, local
local, how is it that the personal attacks vindicate how wrong you were about the liquidity issue? I cite specific bid and offer markets, both contango and backwardation markets, where the spread bid/ask is better than the flat price futures. In terms of incompetence, the shoe is on your foot and you are in way over your head. You fail to grasp the how meaningless cost of carry is to the recent dynamic in the crude market. I made specific and detailed mention for the lack of available storage (full up), suppressed refinery demand, and the glut of near-term supply on the market as the fundamental reason for the crude contango. We are back-stroking in crude, but hard commodities are replacing currency reserves and a firm equity market keeps a bid in the back-end of the curve with some anticipation of economic growth later in the year.
Let me just state for the record that I have extensive experience basis trading physical versus financial natural gas, electricity, and all sorts of interest rate products - so of course I know how to calculate 'cost of carry' and 'clean' versus 'dirty' prices. And let me also state that at least within the interest rate complex the necessity for said calculation for any number of on-the-run or off-the-run cash versus futures spread combinations made Michael Bloomberg a very wealthy man. And positive or negative 'cost of carry' and the relative degree of that carry has little bearing on more or less size being shown in the calendar spread best bid and offer versus the flat price future best bid and offer. Open interest, however, is another matter.