It seems that everyone is going crazy about high oil prices but it seems that quite a bit of it has nothing to do with the supply demand picture. You can tell that much of the price is driven by speculators according to this article.
The nature of a crude oil's term structure tells you what the broad energy market thinks about the future state of oil supplies, according to Schork. Oil in backwardation indicates that the market is concerned about tight oil supplies, because buyers will pay a premium to assume ownership today rather than waiting for a better price later but risking that there might not be any oil to buy. Oil in contango signifies that demand for the commodity is less anxious, and that future supply constraints are not a major concern.
Oil in backwardation is when the near month contract costs more then the later month contracts. While contango is the opposite. So that means people were pouring money into oil futures in the near term contract and thus artificially creating these "record prices."
Supply and Demand dictates that when lots of money is chasing a finite resource like a futures contract then prices will go up. It seems that when both WTI and Brent futures are in contango (which this analyst stated will happen in the next few weeks) then the normal supply demand picture will again take shape. So all this bad weather in the Gulf of Mexico and Nigerian output fears and other nonsense is just buy-side propaganda made up just to keep inflating what some are calling an oil bubble.
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