Daily Times

While vast cuts by producer countries and renewed fuel consumption from easing coronavirus lockdowns may soon rebalance oil supply and demand, some analysts and traders see a glut in storage keeping the market in contango for much longer. A contango market structure means the current value is lower than it will be in later months and encourages traders to store oil to resell it in the future. An especially skewed spread for oil futures or “super-contango” emerged last month, prompting traders to seek quick bargains, store the oil and sell at a greater a profit later. With economic life slowly returning to normal and less supply to go around with major exporters reining in output, the market will begin to move into deficit as early as June. But the need to siphon off the stored oil before buying new supply could keep markets in contango well beyond.