Daily Alert – Wednesday 8th November 2023: Oil is in backwardation (what?)

Mark NugentDaily Alert, Nov 2023

Daily Alert – Wednesday 8th November 2023: Oil is in backwardation (what?)

Good afternoon.

Only one Tier 1 report today. Euro-zone Retail Sales came in at -2.9% versus an expectation of -3.2% and a prior reading of -1.8%. So, the European Central Bank rate hiking cycle is having the desired effect of suppressing economic activity although maybe not as much as the consensus expectation.

Oil is dropping and is in backwardation. This is a silly made-up word meaning the current “spot” price (i.e. buy it now at your local supertanker dealership price) is higher than the futures price. So, people short oil now in the hope of buying it back at a lower price in the future. I just keep watching as my (slight) bias is long.

As an aside, what do you think is the opposite of backwardation? Forwardation? Good guess but no coconut. The answer is contango. Yes it is.

My GBPUSD short position is slowly grinding down and is currently around 0.8x ATR in the money, or around 1.6% gain. It’s a paper gain of course. It only becomes real when I close the trade. But the stop loss is at breakeven, so no need to worry.

I’ll be back tomorrow.

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