Sudden Crude Backwardation Telegraphing Imminent Easing Episode By Fed

Tyler Durden's picture

Commodity prices have certainly been volatile in the last few days with near-record-breaking upside shifts in some. Copper's extravaganza in the last two days was discussed earlier but it is the huge shift in the whole WTI crude complex that is perhaps more fascinating. For the first time since May 2011, Dec 11 WTI is more expensive than Dec 12 and in the last three trading days alone, the entire curve has shifted to backwardation very aggressively. This inflation-prone signal, and much chatter among Fed talking heads on 'helping' the Europeans, could perhaps help explain the strange 'strength' in the EUR as it and the USD circle the drain of fiat currencies. Gold has obviously yet to get going, but today has broken $1660 (up over $50 in the last few days).

The Dec11 WTI future trades higher than the Dec12 WTI future for the first time since May11...

...As the entire WTI curve has inverted in only the last 3 trading days!!

Does this explain the notable outperformance of stocks (relative to credit and sense), suspiciously good performance of EUR relative to the USD given the underlying tail risks, and the drop in vol (that has been the other QE signal of the past as 'normal' risk is removed thanks to Bernanke's shifting the strike on his put a little higher).

Charts: Bloomberg

h/t Taro

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firstdivision's picture

So let's call QE3 for what it really is, Bank Asset Reflation Fund, or BARF for short.

Not just gold, but silver is looking cheap now.  Already short copper and long AUD.

Cassandra Syndrome's picture

BARF, Bitchez....

Its got a ring to it. Sweet find firstdivision 

eisley79's picture


machineh's picture

It's driven by the central banksters' SUCK program -- Sudden Uptrend in Check Kiting.

Leveraged EFSF, bitchezs!

Sudden Debt's picture

Yeah, I also think about buying a 1K short on copper just for the fun of it.

It's like a no lose bet right now.


DoChenRollingBearing's picture

@ firstdivision,

+ 1

Just wait until GOLD goes into backwardation.  When the world says they want their gold NOW, not a promise for delivery later.  ANtal Fekete explores this topic thoroughly.  When gold goes into backwardation, the physical will disappear...

Yes, get your PMs now.

pupton's picture

The "BARF" could be brought about by the "Fraudulent Asset Reflation Trigger", or FART for short.

FunkyMonkeyBoy's picture

Those scum filth bankers have ruined the 'free markets' for ever. If this was a casino (and it is), no one would ever return after spending an everning there.

As history shows, it's time for some hanging...

pupton's picture

No free drinks served by half naked cocktail waitresses...I'm out.

FunkyMonkeyBoy's picture

Would a glass of banker's blood with vodka mixer suit your palate sir?

buzzsaw99's picture

jagerdagger - one part jager, two parts blood

Lets Hang Parliament's picture

The problem is a la Eagles

You can checkout any time you like,
But you can never leave!

Little John's picture

Call me mean spirited but I say hangin's too good fer em, gut shot em and use em fer buzzard bait.

I Got Worms's picture

"Buzzards got to eat, same as the worms."

HardlyZero's picture

New Rome has the special Bankster Moneychanger eradication role to play.

The Pope has it under control.

That is really why the markets are up Pope in town...and he won't put up with any guff.

So everone else can go back to "business" until the clearout begins.

jdelano's picture

Nope.  Headfake.  Just like the last "QE 3 is coming" run up.  Bloodbath in the works.  

Everybodys All American's picture

We find out in ten days or so after the Nov1-2 meeting. I'm inclined to think LSAP of mortgage backed securities is coming, but I'm not convinced it will matter much overall.

WonderDawg's picture

Absolutely. Getting ready to load up on puts. Three weeks ago I called for a relatively short but enthusiastic rally, 1250-1270 on S&P, to be followed by rollover into the next leg down. I might have underestimated the strength of the rally, but it's damn sure not a new bull market. This is exactly the kind of mindset that this rally was expected to create, so everything is falling into place. Bloodbath looming, and I'm lining up my puts.

slaughterer's picture

In 2008 we rallied to the upper Bollinger Band before we crashed.  Upper BB right now is 1380. 

WonderDawg's picture

Could happen, I guess, but it's not the scenario I see unfolding. Wouldn't be the first time I was wrong. I'm not placing my bets until I feel in my gut that this rally has topped, and I'm not there quite yet. That's why I said I may have underestimated. The rally has been more enthusiastic than I expected, so maybe it carries much higher than I originally thought. My strategy is to stay nimble but be ready to play the downside quickly. We'll see.

WonderDawg's picture

Okay, I couldn't stop myself, I bought some Mar CMG puts right before the close. The stock is trading about 1% below the 52 week high, and there is so much downside potential, I just couldn't wait. Way out of the money, but if my scenario proves correct, they'll be in the money well before March. Time will tell.

broke433's picture

They are giving hints that QE3 might be in the way... Maybe not in November but December?

Spaceman Spiff's picture

If not December, then probably January.

Don't worry QE3 is still an option.    We got room with the latest inflation numbers.

If not January, then probably February.

Don't worry QE3 is still an option.   We got room with the latest inflation numbers.

If not February, then definitely in March.

Don't worry QE3 is still an option.    We got room with the latest inflation numbers.

and the beat goes on...


(kinda works for the european bail out plan if you substitute the right words and do the timeline in days.)

jdelano's picture

Broke433 in August

"They are giving hints that Qe3 might be in [sic] the way...Maybe not this month but in September?"

mayhem_korner's picture



Smoked 'im out, nicely, Mr. Back to the Future.  Prolly Ben's bro.  :D

CPL's picture

QE3 is the Euro bailout fund.  Regardless of where it's being dumped, when currencies are nearly at parity with one another.  Print in Europe or the US...shit even Canada or Australia.  Now all FIAT is equal and the powers that be may do as they please regardless of the country of the bailout residence.


I wouldnt bet against oil for all the tea in china.  Far too important and too large to ignore.

LawsofPhysics's picture

"I wouldnt bet against oil for all the tea in china.  Far too important and too large to ignore."  And the understatement of the year goes too...

bigwavedave's picture

Here comes some fresh green bitchez

machineh's picture

It better be!

Cuz if I'm not baked, then I've fallen through a wormhole into a bizarre alternate universe.

TheFourthStooge-ing's picture

It's time to spark up the hopium hookah, bro.


buzzsaw99's picture

okay china, get ready for the big green american wienie. #WINNING!

bob_dabolina's picture

I wouldn't read too much into it

junkyardjack's picture

NFLX is up, I bet they blow out earnings

slaughterer's picture

Seems like a stupid time to begin QE3 prep work.  Game theory would require for the European experiment to first crash so as to bring down asset prices and sky-rocket the USD before the Fed would step in. 

TooBearish's picture

The other side of game theory, rational expectations says SHIT IS SO BAD IN EUROPE THEY GOTTA PULL THE TRIGGER NOW>...

PAPA ROACH's picture

How long until the OWS crowd realizes not only are more bank propping events coming up here, but WE are about to do alot more Euro bank propping? Will this be the point at which the movement goes rogue and starts buring shit down?

MsCreant's picture

I am afraid most of them don't understand what is going on with enough depth to be as pissed as we are.

Hearst's picture

That's true.  QE# will be embraced by OWS with open arms as they thank their overlords for bailing them out of their school debt.  

DoChenRollingBearing's picture

Yes, MsCreant and Hearst.

OWS apparently has no idea of what QE3 will bring.  QE4, etc.  Maybe their student debts will be bailed out, but then with hyperinflation and no jobs, they will still be SOL.

Thunder Dome's picture


(As usual permabears licking their wounds)

ZH has become a fade.

jdelano's picture

As usual  my returns are kicking the shit out of every bull hedge fund in the country.  Guess you were napping through august...

jdelano's picture

And just a little reminder:

Ray Dalio, founder of the largest hedge fund in the world (Bridgewater Associates), said the world debt is so large it will take 10 years to de-leverage it — and “there are no more tools in the tool kit” to postpone the inevitable reckoning. He gave the world the bad news on Friday night on the Charlie Rose Show. The world is divided into debtors and creditors — emerging nations — and the end is near.

We should listen because Ray Dalio is the 55th richest man in the world with a net worth of $6 billion. His company manages $125 billion in global investments, and as Charlie Rose, “Over the last two years, Bridgewater ranked as the largest and best-performing hedge fund in the world. In 2010, his returns were greater than the profits of Google, Amazon and eBay combined.”

Belarus's picture

This is just an interesting window where the markets have totally forgotten one simple fact: debts matter. If the Fed QE's on Nov. 1-2 with economic data literally picking up, the WTI over 90, then I said it before and I'll say it again:



lizzy36's picture

With your astute observations and vast contributions I for one will really miss you.

I have a feeling that the Yahoo boards will greet you with open arms.

Have a nice voyage to mean reversion.

jdelano's picture

Mean reversion?! Oh, snap, this gal knows her shit!

Mean reversion meet Shiller PE.  

Don't worry your pretty little head so much.     

homersimpson's picture

More like your comments will fade by the next Tyler post.

LongSoupLine's picture

Fed POMO bank ponzi-boy and eternal Goldman Sacks loyalist, Dudley, just gave an algo soundbyte saying, "More QE possible."  The shilltards at CNBS are running this quote as a "Breaking News" headline every 5 minutes.

We're silver.