Crude oil futures contracts are moving substantially higher: The contract for October delivery has traded as high as $130.00 per barrel. However, contracts further out on the curve have not rallied as much. The high for the November contract is $109.75 and the December contract high is $109.35.
Massive short covering is the explanation for the outperformance of the near contract. The October contract expires today and the down leg in crude prices over the last few weeks led to establishment of bearish positions. In addition, I would imagine that liquidations by hedge funds and broker-dealers helped push prices below $100.
The message form the markets is clear though. The only way for the US to get out of this financial mess is to reflate the economy: Treasuries are off, the Dollar is off, commodities are higher.
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