Brent crude has successfully consolidated its position above $60 per barrel this week, and WTI is approaching $55 per barrel, which would be the highest oil price in more than two years. The gains come after OPEC officials have all but signaled that they will extend their production cuts in a few weeks at their meeting in Vienna. But crucially, an extension would occur at a time when the oil market has significantly tightened, bolstering the bullish momentum exhibited for crude prices. Evidence that the oil market is tightening can be found in the oil futures market. The futures curve for Brent has already been in a state of backwardation for some time—a situation in which near-term contracts trade at a premium to futures dated six months or a year out. The result is a downward sloping futures curve (i.e. longer-dated contracts are cheaper than near-term contracts). The reason […]