what caused the backwardation of commodity term structure?
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If you want to use Oil as an example, oil producers hold valuable real option in the decision to produce oil or not, so backwardation occurs as producers decide to produce or not. This creates backwardation.
Anything that benefits the holder of the underlying between now and expiration creates backwardation. This includes: * Dividends (if the underlying is a stock) * Interest Payments (if the underlying pays coupons) * Convenience yield (the business benefit of having inventory on hand, which you only get if you actually need the commodity in inventory) - for commodities, this is the most common reason for backwardation. However there are also things that tend to reverse backwardation (creating contango) * Increase in the risk free rate * Storage costs * Any other holding costs. And finally, seasonality can create either contango or backwardation, depending on how it interacts with the product. If I understand it right, the “natural state” of a non-currency future or forward is contango, based on the cash-and-carry arbitrage model. So the aspects that create backwardation usually have to be fairly substantial (in comparison to the costs of borrowing) before they take effect.