How? If in contango, futures prices for a given maturity date are falling. In normal backwardation, futures are rising.
Wouldn’t that be buying high and selling low? Maybe Thackney can explain it.
I visit this site regularly and they’ve been discussing it this week: http://tonto.eia.doe.gov/dnav/pet/pet_pri_top.asp
No.
When current prices are lower than expected prices, the market is in contango.
When current prices are higher than prices expected in the future, the market is said to be in backwardation.
http://www.eia.doe.gov/pub/oil_gas/petroleum/presentations/1999/high_propane_stocks/sld017.htm
See also:
http://www.eia.doe.gov/pub/oil_gas/petroleum/analysis_publications/oil_market_basics/stocks_text.htm