No More CL Contango

Discussion in 'Commodity Futures' started by bone, May 20, 2020 at 7:10 PM.

  1. bone

    bone ET Sponsor

    The Contango is pretty much priced out of the forward CL curve, and June CL expired at $32.50 with July settling at $31.96 on Tuesday.

    Quite a bullish sign for stocks.
     
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  2. Overnight

    Overnight

    That depends on what Powell spews tomorrow, and whether the case counts start going up in the next few weeks as we roll-out these phased-openings.
     
  3. bone

    bone ET Sponsor

    Point being - seeing Backwardation come back into the crude oil market means that serious commercial energy users and producers are feeling rather chippy about the future as compared to only a few weeks ago. I am certainly not suggesting that the balance of 2020 will be like 2019. But it is worth noting that you have a serious segment of the economy outside of the immediate stock trading community pricing in some prospects for near term economic growth.

     
  4. Overnight

    Overnight

    I didn't look at the prices during todays RTH session, but you say there was backwarding? All I see as I look at it now as of this timestamp is the normal contango we would see in a "healthy" CL market.
     
  5. bone

    bone ET Sponsor

  6. faltd

    faltd

    Why bullish? Stocks traded down when oil was in contango and in the past also when oil was not in contango. What's the relationship precisely? Thanks.

     
  7. faltd

    faltd

    How so? Future spot prices are expected to be lower. How is this necessarily good for stocks? I don't see any correlation. I have certainly done my homework and investigated oil and broad stock market correlations and found hardly any evidence of stable correlations holding...

     
  8. Atikon

    Atikon

    What exactly do you mean with "done my homework"?
     
  9. faltd

    faltd

    I have calculated moving correlations between WTI and spx over many years and of varying window sizes. No specific correlation dynamics sprang to mind.

     
  10. bone

    bone ET Sponsor

    Sharpen your pencil.

    ES and CL has a 76% positive correlation Daily close-on-close the past 180 trading sessions.

    CL and Russell 2000 have a 91% positive correlation Daily close-on-close the past 180 trading sessions.

     
    Last edited: May 20, 2020 at 8:18 PM
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