Chart of the week

Our chart of the week shows the relationship between crude oil (DBO)(UCO) (USL) prices and the changes in its forward curve. Historically, periods of weak crude oil prices have coincided with a “contango” structure, while periods of strong crude oil prices have overlapped with a “backwardation” structure.

How Oil’s Forward Curve Is Reacting to Oil’s Upside

Between May 12 and May 19, the spread contracted from $1.66 to $1.09, while crude oil prices rose 5.2%. The decrease in the spread could suggest that concerns about crude oil’s demand-supply imbalance are easing, which could have helped push prices higher.

Crude oil’s forward curve dynamics can affect oil storage and transportation MLPs (AMLP). The forward curve can impact upstream oil producers’ (XOP) hedging decisions. The curve’s dynamics can also have important implications for the performance of commodity-tracking ETFs such as the United States Oil ETF (USO). As a result of the current contango structure in the oil market, USO has underperformed crude oil prices.

Latest articles

On June 25, the soft economic data isn't an isolated case. We have been getting a flurry of dismal data points. The US economy added only 75,000 non-farm jobs in May.

French retail giant Carrefour has agreed to sell an 80% stake in its China operations for ~$705 million to Suning.com, an Alibaba (BABA) backed company. While China represents a massive opportunity with its almost 1.4 billion population, it has not been an easy market for foreign companies, at least when it comes to retail and e-commerce.

On June 25, US Secretary of Agriculture Sonny Perdue told CNN in an interview that the US-China trade war has impacted US farmers. He said that farmers “are one of the casualties” of the trade war.

25 Jun

Hang Seng and Nikkei 225 Lose amid Trade Worries

WRITTEN BY Mayur Sontakke, CFA, FRM

After rising marginally yesterday, Hong Kong’s Hang Seng Index fell today. The index lost 1.15% to end at 28,185.98. Only seven stocks in the index rose, while 39 declined. Four remained unchanged. Tencent Holdings (TCEHY) was one of the worst performers with a 1.8% fall.

Square (SQ) was absent from the list of the inaugural members of the Libra Association, the entity that will ensure that Facebook’s (FB) Libra cryptocurrency works as intended. Nearly 30 companies have joined the Libra Association.

Kroger (KR) stock fell 2.2% on June 20—the day the company announced its results for the first quarter, which ended on May 25. The negative sentiment for the stock continued.

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