Replies to post #42662 on ~*~Mining and Metals Du Jour~*~

[Giovanni]

Deepest Backwardation Since ‘07 Shows World Short on Commodities

For an idea of exactly how strong the fundamentals are for commodities such as metals, agriculture and oil today, consider this: These markets are now showing the steepest backwardation in more than 14 years.

That is, the premium for commodities that can be delivered now versus later into the future is the highest it has been since at least 2007, signaling just how strong the world’s demand is for raw materials and how tight supplies are.


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Deepest Backwardation Since ‘07 Shows World Short on Commodities
By Gerson Freitas Jr and Michael Roschnotti
April 30, 2021, 3:03 PM EDT
Demand for materials from oil to copper and grains is surging
Supply tightness comes as economies emerge from the pandemic
Higher Oil Prices May Not Impact Consumption
LISTEN TO ARTICLE
1:11

CL1
WTI Crude
65.69USD/bbl.+1.20+1.86%
BCOM
BBG Commodity
91.65USD+0.69+0.76%
HG1
Generic 1st 'HG' Future
452.15USd/lb.-0.70-0.15%
NG1
Generic 1st 'NG' Future
2.97USD/MMBtu+0.00+0.03%

For an idea of exactly how strong the fundamentals are for commodities such as metals, agriculture and oil today, consider this: These markets are now showing the steepest backwardation in more than 14 years.

That is, the premium for commodities that can be delivered now versus later into the future is the highest it has been since at least 2007, signaling just how strong the world’s demand is for raw materials and how tight supplies are.

The World Needs More Commodities
Shortage of commodities has pushed backwardation to nearly 15-year high


Source: Bloomberg, CME, ICE, LME

Note: Chart uses current BCOM constituents and weightings. Calculation uses current spot futures price versus the forward 1 year futures price. Some futures prices were estimated in this calculation.

In commodities markets, futures are frequently pricier at longer maturities because they reflect the cost of carrying inventories over time as well as future demand expectations. But urgent demand has flipped about half of major commodity markets tracked by the Bloomberg Commodity Index including oil, natural gas, copper, soybeans into backwardation.

Pimco Says Commodity Rally Reveals Shortages of Vital Materials

Prices for everything from copper to oil have sky-rocketed as the largest economies rebound from the pandemic amid massive government stimulus spending. Manufacturing and building are picking up, and more people are driving their cars and booking airline tickets as they get vaccinated. China is buying record amounts of corn, and agricultural grains have gotten so expensive it’s upending global trade flows.