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