The oil war combined with the devastating effect of the coronavirus-induced lockdown on economies has triggered a dramatic fall in the price of oil with WTI plunging to its lowest level in more than 20 years with the May contract sinking below $15. On top of that, there is a wide contango across contracts, demonstrating both the huge oversupply currently as well expectations that some of this surplus will reduce in coming months as the producers’ cuts start to take effect and the peak of the global lockdown passes.
This huge contango and wide difference between the prices of various futures contracts are making it very complicated to put long-term trading strategies together as it remains expensive to keep positions open for any length of time, due to the enormous contango effect.
