Question

If the May delivery oil futures contract price drops to negative prices, and the Jun, Jul...

If the May delivery oil futures contract price drops to negative prices, and the Jun, Jul and Aug delivery contracts prices are strictly increasing, our oil futures curve will be in backwardation.

True
False
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Answer #1

Answers :- False

Explanation:-

A contango market is one where futures contracts trade at a premium to the spot price. For example, if the price of a WTI crude oil contract today is $60 per barrel but the delivery price in six months is $65, then the market is in contango.

In the reverse scenario, supposing the price of a WTI crude oil contract today is $60 per barrel but the delivery price six months down the line is $55, then the market is said to be in backwardation.

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