Oil is still in Contango market

Contango is a term used in the futures market to describe an upward sloping forward curve (as in the normal yield curve). One says that such a forward curve is "in contango" (or sometimes "contangoed").

Formally, it is the situation where, and the amount by which, the price of a commodity for future delivery is higher than the spot price, or a far future delivery price higher than a nearer future delivery.

In 2005 and 2006 the crude oil market was in contango. This was a result of the perception of a future supply shortage. Many hedge funds took advantage of the arbitrage opportunity by buying present oil, selling a future contract and then simply storing the oil for future delivery. It was estimated that perhaps a $10-20 per barrel premium was added to spot price of oil as a result of this. The contango ended when global oil storage capacity became exhausted.