Question on WTI Contango/Backwardation and Storage Costs

Question

Hey everyone, still trying to wrap my head around some of the more nuanced aspects of the oil market. I get the basic concept of contango and backwardation with $WTI futures, and how it relates to supply/demand dynamics and expectations. What I'm finding a bit harder to grasp is the actual *impact* of storage costs on these spreads, especially when we're talking about periods of high inventory build. Like, if storage is really tight, does that directly translate to a wider contango, or is it more about the perceived future availability? I'm curious how you seasoned traders factor those very real, physical storage constraints and their associated costs into your analysis when looking at calendar spreads. Any insights would be super helpful.

greta.murphy · Accepted Answer

Storage costs, particularly for crude, are significant and directly factor into contango. If it costs more to store oil than the future price difference justifies, that contango will narrow or flip, all else being equal. It's not just a theoretical input.

priya97 · Answer

Storage costs are a significant factor, but it's really the rate of inventory build/draw and the perceived scarcity of actual storage capacity that move the needle most on those spreads. Physical contango doesn't just reflect storage cost, it also reflects how desperate people are to offload barrels versus find a place to put them.

nsuwannarat · Answer

เรื่องนี้น่าสนใจเลยครับ ผมก็เคยสงสัยเหมือนกันว่าต้นทุนการจัดเก็บน้ำมันจริงๆ แล้วส่งผลต่อส่วนต่างราคามากน้อยแค่ไหนเวลาสต็อกสูงๆ โดยเฉพาะเรื่องเรือขนส่งกับคลังสำรองนี่แหละครับ

Question on WTI Contango/Backwardation and Storage Costs

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