For the given commodity, as of December 2012, is the curve in contango, backwardation or BOTH (contango AND backwardation)?
WTI Crude Oil Futures: currently trading around $88 a barrel. (Each contract is for 1,000 barrels of crude, so notional value of 1 future is ...wait for it... $88,000). The minimum fluctuation is one cent per barrel. WTI is in CONTANGO out to December 2013 (a one-year contango) when it reaches about $91 and 40 or 50 cents (roughly $3.50 premium for oil in one year versus oil now). After Z13 it's all backwardated and the curve looks like an inverted quadratic function.
The natural follow-on question..what about Brent?
Brent Futures is around $108 a barrel and the curve is simple - PURE backwardation. One future here is also for a thousand barrels, so the notional of a Brent future is rougly $108,000 (or about 1.1x the value of the TI notional).
There are interesting contract differences between Brent and TI futures. For example, Brent futures come with the option to cash-settle, whereas the TI always results in physical delivery (delivered "Free-On-Board" at Cushing, Oklahoma). TI futures are traded on CME Globex. Brent can be traded on WebICE.
WTI Crude Oil Futures: currently trading around $88 a barrel. (Each contract is for 1,000 barrels of crude, so notional value of 1 future is ...wait for it... $88,000). The minimum fluctuation is one cent per barrel. WTI is in CONTANGO out to December 2013 (a one-year contango) when it reaches about $91 and 40 or 50 cents (roughly $3.50 premium for oil in one year versus oil now). After Z13 it's all backwardated and the curve looks like an inverted quadratic function.
The natural follow-on question..what about Brent?
Brent Futures is around $108 a barrel and the curve is simple - PURE backwardation. One future here is also for a thousand barrels, so the notional of a Brent future is rougly $108,000 (or about 1.1x the value of the TI notional).
There are interesting contract differences between Brent and TI futures. For example, Brent futures come with the option to cash-settle, whereas the TI always results in physical delivery (delivered "Free-On-Board" at Cushing, Oklahoma). TI futures are traded on CME Globex. Brent can be traded on WebICE.
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