Dec 2012 bid 89.37 but Dec 2011 ask 89.29 ?

Discussion in 'Commodity Futures' started by m22au, Dec 2, 2010.

  1. m22au


    I freely admit that I don't have a very good understanding of oil pricing beyond the front month.

    However what I am finding unusual is that despite the contango from Jan 2011 to December 2012 (eg. Jan 2011 at 87.22, Dec 2012 at 89.40), that the December 2012 contract is bid a few cents above the offer for December 2013 and December 2014.

    So while people are happy to pay a couple of dollars above the front month price for delivery in December 2012, they are able to buy the Dec 2013 and Dec 2014 contracts at prices a few cents lower than December 2012.

    Can anyone explain why this may be the case?
  2. JPope


    We were also looking at that here. Can't figure out why those are going inverse. It's likely an opportunity at some point, but I think those can run a ways.
  3. 1) ?....Stale quotes? :confused:
    2) ?....Crude oil is evolving into a "money market" instrument away from a physical commodity? Somebody out there wants to do steepener and flattener trades? :eek:
  4. m22au


    I am 99% sure that these are NOT stale quotes.

    Looking at it now, Dec 2012 bid 89.38

    Dec 2013 ask 89.31
    Dec 2014 ask 89.27

    Dec 2017 90.00 x 90.25
  5. cokezero


    perceived oil shock in 2012?

    2012 end of the world premium?
  6. dec red dec is trading in backwardation 4/5 right now for the z11/z12 spread, just figured I'd confirm it as well definitely not a stale quote... f1/g1 is trading only -43/41, looking bullish it would seem.
  7. m22au


    Dec 2012 bid 89.30
    Dec 2013 ask 89.09
    Dec 2014 ask 89.09

    Dec 2014 $0.21 cheaper than Dec 2012
  8. m22au


    Now even more noticeable:

    Dec 2011 bid 89.42

    Dec 2012 offer 89.02
    Dec 2013 offer 88.42
    Dec 2014 offer 88.32
  9. JPope


    They really blew out today. Dec 15 Trading less than the front month. I'm not really sure how to interpret these, but I know the whole curve can go inverted and by several dollars depending on how steep it is. I'm just perplexed that this happens with nearby supplies so plentiful. I know there are some ET'ers trading these regularly and fluently, I just don't feel there yet.
  10. m22au


    Thank you for sharing your thoughts JPope.

    The thing is, is that I'm close to the point where I pull the trigger and open a long position that I intend to hold for a period of 13 or more months. I just haven't worked out which month to buy.

    On one hand it's absolutely great that Dec 2015 is offered below Jan 2011 bid, but at the same time it's a bit scary. ie., what if I buy Dec 2015 and it then gets even more cheaper than the front month contract?


    With my limited knowledge of oil, my natural conclusion would be that with the curve like this, it is a strong indication that supplies are tight. However I respect your suggestion that this is simply not the case in the "real world".

    #10     Dec 3, 2010