Oil contracts price differences

Discussion in 'Commodity Futures' started by Coder2, Sep 12, 2008.

  1. Coder2



    Can someone please explain to me how the expiration of a futures contact affects the contracts pricing.


    ICE WTI Oct08 101.75
    ICE WTI Nov08 101.78

    IPE e-Brent Oct08 98.36
    IPE e-Brent Nov08 100.00

    It looks like the WTI contacts are converging because the Oct08 contract is almost at expiry.

    In contrast, the two Brent contracts are still very wide apart.

    Will the Brent contracts converge at expiry? What reason would there be for them not to converge?


    Coder :)
  2. I believe that's because Brent is well supplied in Europe - therefore strong contango market.

    WTI is responding to the threat of the storm and so the spread (as of now) is trading backwardation. I'm sure if the storm doesn't do too much damage to the refineries then it will go back into contango.