Publications: Notes at the Margin

Bending the Forward Price Curve: Price Spreads, Inventories, and Hot Money (February 8, 2021)


Crude oil prices have almost doubled in around 100 days. The increase has not been spurred by a consumption surge but rather by continued production discipline by the members of the OPEC+ group. The output cuts have led to inventory reductions, which have shifted the forward price curve from contango to backwardation. Speculation has also played a part. As the analysis here illustrates, alterations in speculative positions, as measured by changes in the net position of money managers in petroleum futures and options, can augment or offset the impact of fluctuating inventories.


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