It Takes Crude to Contango

One of the real problems involved with rules of thumb is the tendency of thumbs to show up in the most unexpected places.

As David Merkel noted in a Columnist Conversation post on Friday, many observers link the price of commodities with their forward curve.

The rule of thumb for crude oil has been that rising prices are accompanied by backwardation, or the price of distant futures below those of near-term futures, and falling prices are accompanied by contango, or near-term futures below those of distant months. ...