GREY:BNPUF - Post by User
Post by
RetailRubeon Jul 19, 2019 2:42pm
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Post# 29941015
Deep Dive ... More about Futures Backwardation
Deep Dive ... More about Futures BackwardationI mentioned in the Nat-Gas Futures post that Pemex has hedged less than they usually do by now. Pemex has their own problems, but it is an indicator that the Backwardation problem that Bonavista complains about in the nat-gas market is also showing up in the oil market.
My evidence is from another article that I clippled from my Financial Times newspaper. See Supply shocks fail to stir oil trading numbed by shale dated 2019-May-22. "Contracts for delivery in the near future are trading at the largest premium to later months in five years ... Hedge funds, which may be wary of aggressive wagers on oil after getting burnt by a major sell-off last year, are gravitating towards bets that this premium ... will continue to increase, rather than betting on the outright price." "... a number of major energy-focused hedge funds have shut up shop in recent years, meaning the amount of "hot" money flowing into oil has been reduced. The biggest gunslingers are gone."
This widespread and severe backwardation makes hedging expensive for all energy E&P companies, which means lenders are probably having Bonavista-like discussions with many of their borrowers right now. This helps Bonavista make its case.