Oil traders suffer contango blues

A contango is usually a sign of temporary surplus in the physical commodity markets, and it encourages inventory building. However, a contango and the recent spot price rally is a very unusual phenomenon in the energy markets, reflecting both a weak physical spot market, or near-term oversupply, and a tight medium-term balance.

In contrast, nearby crude oil prices have spent most of the past 20 years above the longer-dated deliverable prices on the perception that there was plenty of spare production capacity in the Organisation of the Petroleum Exporting Countries to meet future demand.

Financial Times