There has been no damage to the oil fields, but the oil market remains very tight as evidenced by the recent move into backwardation. |
I am sure that your position is a hedge, but if your physical metal is delayed, you may have to borrow at this backwardation. |
The contango or backwardation is recorded in the income statement when the swap expires. |
A backwardation situa tion was followed by a contango situation, which acted as an incentive to stockpile mineral oil products. |
Contrary to those teachings, the normal condition of the futures markets is one of contango, not backwardation. |
That is, the value of having ready access to a stock of oil can justify holding inventory when the futures curve is in backwardation. |