Brent Backwardation Favors BNO Over USO

July 30, 2012

Brent's backwardation widened to double-digit levels last week, while natural gas moved into contango.

 

[This article previously appeared on HardAssetsInvestor.com and is republished here with permission.]

 

Featured Commodity


CONTANGO WATCH: Brent's backwardation widened last week. Rolling front-month Brent contracts now yields 11.27 percent annualized, and the benchmark remains the preferred option for bullish exposure to crude oil.

Rival West Texas Intermediate (WTI) remains in contango as it has been for the vast majority of the year amid infrastructure bottlenecks in the U.S. Midwest. Thus, the United States Brent Oil Fund (BNO), which holds front-month Brent contracts, is seen as superior to the United States Oil Fund (USO), which holds front-month WTI contracts.

ROLL COSTS: Investors net 11.27 percent

BOTTOM LINE: Backwardation

 

Has oil moved into backwardation yet? What does corn's roll yield look like? How do you know when it's time to buy—or sell?

Each week, we investigate the futures curves of the U.S.' most important commodities, helping investors better understand the market and seize buy-and-sell opportunities as soon as they arise.

To see current contango curve and front-month roll costs for each of our selected commodities, please select a sector or commodity below (or read the whole report ):

Data as of close on July 27, 2012
Data courtesy IndexUniverse.com

Energy

Agricultural Commodities

 

Precious Metals

 

Soft Commodities

Industrial Metals

 

Current Roll Previous Week's Roll Past Year Average Roll Historical 07/30 5YR Annualized Roll
Energy WTI 4.08% 3.98% 0.30% 11.04%
Brent -11.27% -8.56% -0.58% 2.52%
HH Natural Gas 5.05% -4.56% 3.04% 12.15%
Precious Metals Gold 0.67% 0.99% 0.12% 1.23%
Silver 1.38% 1.12% 0.12% 1.51%
Platinum 1.66% -4.04% 0.25% 0.66%
Palladium 2.79% 0.70% 0.25% 1.92%
Industrial Metals Copper 0.88% 0.32% -0.00% -1.01%
Aluminum 11.12% 9.47% 0.55% 4.96%
Zinc 1.30% 0.98% 0.11% 4.63%
Lead 2.53% 2.56% 0.21% 3.38%
Nickel 1.45% 1.29% 0.09% 1.78%
Tin 0.33% 0.19% 0.07% 0.71%
Agricultural Commodities Corn -2.18% -13.48% -1.02% 8.71%
Wheat 5.92% 3.07% 2.59% 17.80%
Soybeans -31.88% -28.55% 0.04% -26.12%
Live Cattle 32.07% 28.88% 0.88% 33.27%
Lean Hogs -61.14% -63.29% 0.62% -42.84%
Soft Commodities Coffee C 6.83% 5.17% 1.00% 7.69%
Cocoa 1.89% 2.70% 1.01% 3.27%
Sugar #11 2.98% 0.40% -2.03% 6.80%
Cotton #2 5.93% 9.14% -0.44% 5.19%

 

 

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