The Bull Case for Big Oil - EXCELLENT ARTICLE

The contango has narrowed dramatically over the past few weeks (one month ago the difference between the April and May contracts was $4.46 versus $0.66 today), oil has moved higher. This is the first sign that oil has bottomed. I expect the price movement to continue and eventually result in a market where the futures months sell at a discount to the current month (backwardation). As contango is bearish, backwardation is bullish since all available supplies are rushed into the market to satisfy increasing demand.

NVDL: If all this is greek to you, here's the simple bottom line (and serves as another prediction on this blog). It's mid-March 2009 right now. We are about to see oil prices move upward. April or May will see these prices can strength as backwardation gains momentum. That may seem absurd given OPEC's recent position and oil price entropy of late. The current prices are actually crazy - WAY too low.

clipped from seekingalpha.com Oil serves as an excellent economic barometer. Walk down the aisles of any store, and the effect of the economy on the price of oil is displayed. From an input cost in plastics to the cost of transporting goods to market, oil greases the wheels of commerce. As we have entered the worst recession since the 1930s, it is unsurprising to see the cost of oil collapse. From a peak above $145 per barrel in July 2008, oil dropped to a low of $31.41 in five months (78%). During this price drop, the technical dynamics of the futures market became prevalent. As the contango has narrowed dramatically over the past few weeks (one month ago the difference between the April and May contracts was $4.46 versus $0.66 today), oil has moved higher. This is the first sign that oil has bottomed. I expect the price movement to continue and eventually result in a market where the futures months sell at a discount to the current month (backwardation).