The crude oil market is in a premium state
Due to growing concerns about demand and oversupply in 2024. For the first time in four months, oil futures prices moved into contango, but that was short-lived and the price curve returned to the more common backwardation, where spot prices are higher than future delivery prices
Contango status is viewed as a negative indicator and is often seen as an early sign of an impending economic slowdown, although the U.S. has not experienced a recession during this time. U.S. West Texas Intermediate crude oil prices fell 5% on Thursday to about $72.90 a barrel in early Asian trading. Brent crude oil also fell about 5% on the day to about $77.45 a barrel.
Weak economic data from China had a negative impact on market sentiment, and the latest U.S. government data showing a rise in U.S. crude oil inventories and record production estimated at 13.2 million barrels per day contributed to the price decline.
Prices continue to slide even as Saudi Arabia and Russia maintain output cuts of 1.3 million barrels per day until the end of the year. As markets weaken, OPEC may be under pressure to make deeper cuts.
Tips: In the context of the securities market, "premium" usually refers to the market price of a certain financial product (such as futures, options or other derivatives) being higher than its theoretical price or the price of the underlying asset. This term is often used to describe the following situations:
Futures Market: If the price of a futures contract is higher than the spot market price (i.e., the spot price), this situation is often referred to as "contango." This may be due to factors such as expected changes in supply and demand, increased holding costs, or increased uncertainty about future prices.
Options Trading: In options trading, "contango" can refer to the actual trading price of an option being higher than its intrinsic value. For example, the market price of a call option may be greater than the difference between its exercise price and the current price of the underlying asset.
Arbitrage Trading: In some arbitrage trading strategies, traders may look for the difference between the market price (contango) and the theoretical price to make a profit.
Generally speaking, "premium" in the securities market reflects the difference between the market's expectations for the future price of an asset and its current price. This price difference may be affected by a variety of factors, including market sentiment, supply and demand, and macroeconomic factors.
Contango status is viewed as a negative indicator and is often seen as an early sign of an impending economic slowdown, although the U.S. has not experienced a recession during this time. U.S. West Texas Intermediate crude oil prices fell 5% on Thursday to about $72.90 a barrel in early Asian trading. Brent crude oil also fell about 5% on the day to about $77.45 a barrel.
Weak economic data from China had a negative impact on market sentiment, and the latest U.S. government data showing a rise in U.S. crude oil inventories and record production estimated at 13.2 million barrels per day contributed to the price decline.
Prices continue to slide even as Saudi Arabia and Russia maintain output cuts of 1.3 million barrels per day until the end of the year. As markets weaken, OPEC may be under pressure to make deeper cuts.
Tips: In the context of the securities market, "premium" usually refers to the market price of a certain financial product (such as futures, options or other derivatives) being higher than its theoretical price or the price of the underlying asset. This term is often used to describe the following situations:
Futures Market: If the price of a futures contract is higher than the spot market price (i.e., the spot price), this situation is often referred to as "contango." This may be due to factors such as expected changes in supply and demand, increased holding costs, or increased uncertainty about future prices.
Options Trading: In options trading, "contango" can refer to the actual trading price of an option being higher than its intrinsic value. For example, the market price of a call option may be greater than the difference between its exercise price and the current price of the underlying asset.
Arbitrage Trading: In some arbitrage trading strategies, traders may look for the difference between the market price (contango) and the theoretical price to make a profit.
Generally speaking, "premium" in the securities market reflects the difference between the market's expectations for the future price of an asset and its current price. This price difference may be affected by a variety of factors, including market sentiment, supply and demand, and macroeconomic factors.