FACTS FROM THE CONTANGO SITUATION OF GAS AND OIL MARKETS

The year 2017 has been dominated by a series of events and challenges, which among them the oil market is still challenged by high stocks and slow prices development. The overall events can be resumed to: a) OPEC and allied nations are trying to make gains in curbing oil output, not only they extend their cuts, but they also adhere to them, b) US oil production will keep growing and keep costs down, and c) oil demand growth is recently strengthening. This paper intends to answer the question: what is the current state of the oil and gas industry and where is it heading? Since July 2014, the oil market is in a contango situation, i.e., a situation where the future price is above the expected future spot price. The market structure has been benefiting American manufacturers for almost 3 years, and this is the order that OPEC is currently trying to subvert. Much of the oil and gas industry has survived tough years with weak demand and low prices. This article describes first the evolution of the price of gas and oil in the main oil markets and second the rebalancing of the market that can push the price level upwards affecting positively the future equilibrium of many countries.