"The fixed income team at Credit Suisse have a good note talking about what’s really driving WTI backwardation. Small hint, they don’t think it’s much to do with Egypt.
They put the backwardation down to three things.
First, there’s genuine seasonal demand for light sweet crude, which is always strongest in the summer months. The trend started at least a month ago.
Second, they believe there is a very strong possibility that a lot of the oil that’s stored at the WTI delivery point at Cushing is not necessarily made up of high-quality, low-sulfur, light crude oil — which is what is being demanded by the market — but of a wider category of oil.
Third, the WTI low-interest rate carry trade is being unwound."
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