Timing Indicators for Structural Positions in Crude Oil Futures Contracts

Abstract

This article argues that it is plausible that there are two fundamental metrics that could be useful for deciding upon crude oil futures positions: (1) whether there are ample inventories or not; and (2) whether spare capacity is at pinch-point levels or not. The article will further argue that a dynamic allocation strategy alone is not sufficient for holding the line against losses in a crude-oil-dominated strategy.

Keywords: Crude oil futures, spare capacity, structural positions, futures contracts, contango, backwardation, asset allocation

JEL Classification: G11, Q41