How severe is the global oil glut? It’s the worst in at least a decade, if oil-market tea leaves are any guide.Read the whole thing.
Crude oil for delivery next month is now trading at a whopping $15 discount to oil for delivery in January 2010. When far-out oil prices are higher than "prompt" oil prices, traders say the oil market is in "contango." The dance the market is doing now is a "super-contango"--the spread hasn’t been that big since oil prices collapsed in 1998, Bloomberg reports, and it widened slightly today. . .
So why is today’s super-contango only getting bigger? Because it’s now acting as a credit-crunch-o-meter as well. The main limitation to taking advantage of fatter future prices is financing the cost of buying and storing the oil. With credit markets frozen, many of the smaller players that would normally be diving head first into the contango are left on the sidelines. So the market’s normal self-correction isn’t happening.
(via Planet Gore)