Pages

Sunday, November 29, 2020

Peter Sainsbury: Back to backwardation: Why the shape of the futures curve is positive for commodity prices in 2021

 Link:

The commodity futures curve has moved sharply over the past few months towards backwardation. This should increase the incentive for long side investors to park their funds in commodities and given numerous macro tailwinds (e.g. a weaker dollar, rising inflation expectations and infrastructure spending), set the market up for a promising 2021.

But first, a little bit of background on the futures curve. When the futures price curve is downward sloping, i.e. the futures price of a commodity in say six months’ time is lower than the current spot price, the market is said to be in backwardation. This is also known as an inverted curve or an inverted market.

No comments:

Post a Comment