Backwardation "vortex" fueling oil's rally

Source: reuters



Backwardation "vortex" fueling oil's rally
Wed Oct 31, 2007 4:01pm EDT


By Richard Valdmanis and Robert Campbell

NEW YORK (Reuters) - Falling crude inventories and the shape of the futures curve will likely continue to feed back into each other and boost oil prices further until there is a meaningful change in the global supply picture.

Since July the market has been "backwardated," where the price of oil that is about to be delivered is higher than for later deliveries. Backwardation encourages the sell-off of stocks and is seen as a sign of supply tightness or even shortages, which further boosts prompt prices.

The current rally will likely go on until oil supplies rise or demand falls enough to reduce the incentive to sell off oil in storage, energy experts said on Wednesday.

"Given the economics of storing oil, it makes no sense to hold on to inventory right now. Storage owners are taking the economically prudent step and dumping inventories," said Stephen Schork, editor of the Schork Report.

Read more: http://www.reuters.com/article/reutersEdge/idUSN3145897620071031

Now I know that it is futures jargon, but Good Lord, that is just WRONG! Wrong, I say! It's Wrong!

Let's take two Germanic terms, lash them together and put a Latinate termination and then a Latin word after it.

Possibly longer than that.

Oil gained less than other commodities today.

All this speculation about the price of oil is just hogwash to keep people from noticing that their wallet is getting lighter.

Peak oil is here, yes, but it ain't going to happen THAT fast. What we have here is inflation, pure and simple.

Look at gold, silver, and even other currencies didn't follow us down. Thanks FED.

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=3048701&mesg_id=3048701