Market balances are reflected in changing futures price spreads (1/28/2015)

As supply and demand balances loosened in the second half of 2014, global inventories increased and crude oil prices for near-term delivery declined substantially more than prices for delivery further into the future. In January 2015, the price discount of near-term deliveries to longer-dated deliveries grew to the highest level since 2009 for North Sea Brent futures and since 2011 for West Texas Intermediate (WTI) futures. As of January 27, the difference between the front month contract and the sixth month contract was $7.33 per barrel lower for Brent and $8.67 per barrel lower for WTI than at the start of July before the steep decline in oil prices (Figure 1). The futures curves moved from backwardation (when prices for near-term deliveries are higher than prices for longer-dated deliveries) in early July to contango (when prices for near-term deliveries are lower than prices for longer-dated deliveries) over this period. ... More »