Wednesday, September 8, 2010

Oil Contango Doubles: Oil To Rise = U.S. Dollar to Drop

The spinners are at work. Bloomberg reports today that oil contango for March 2011 has doubled: the price difference doubled to $5.76 a barrel last month from $2.60 at the end of July.

Bloomberg calls this a "price advantage, or contango", in a reference as what you could make if you could buy and hold crude until march 2011. That might work for people who have oil tankers parked in their driveways.

However, they say that this is because "traders are showing increasing confidence that U.S. economic growth will rebound next year".

We might take exception to that. Could it be instead because the USD will drop due to further QE, thus making commodities, which are priced in USDs, rise? Perhaps it is a good idea to stock up on them - if you are in the U.S.

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