Oil Futures Spark Debate: $100 Level Shortlived?

Oil contracts for delivery in three to five years’ time are trading at their biggest ever ­discount to spot prices, prompting a debate about whether the era of triple-digit oil prices will be a short-term phenomenon.

Spot oil prices have rallied nearly $20 since the start of the year and traded above $125 a barrel yesterday, on the back of supply disruptions and geopolitical fears over Iran.

Over the same period, oil for delivery in December 2018 has risen $1 to about $95. This has opened a record gap of more than $30 between spot and five-year contracts. “The market has the perception that oil supply will increase in the future and that is holding back the price of forward contracts,” said Mark Thomas, head of energy futures at commodities brokerage Marex Spectron, citing expectations of higher output in Iraq, Brazil, the US and Canada.

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