- With regard to likely future performance, of far greater importance than the break above long-term resistance is that the physical supply situation remains unusually ‘tight’.
- Strong backwardation can only arise and be sustained in the oil market during a period when the demand for oil is high relative to the currently available supply.
- Since the cost of storage is always above zero, the futures price will always be higher than the spot price unless there is a current shortage of the physical commodity.
For further details see:
Looking At Oil From Different Perspectives