CL Jan 09 expired today, below is the reported causes table for the last six trading days. Most of the news was about the OPEC meeting, which announced a very large allocation cut on the 17th, and the potential that Russia, Azerbaijan, and Kazakhstan all might join in on restricting supply. The market did not respond in the expected fashion, but rather dropped. That appears to be because there is no available storage for oil, so no one will take delivery to carry, which put even more downward pressure on front month today. Monday, the price of oil looks to jump by about $10/b, as February 09 becomes front month. (The price of Feb 09 went up half a buck or so today as the price of Jan 09, the front, fell about two and a half bucks.) The rest of the news, which appears to have been the determining factor in price for the most part, is a sharply slowing global economy.
The contango narrowed a bit from December 5 to 11, but apparently the absence of any on ground storage available combined with traders trying to exit the contract before expiry, combined to push Jan 09 down as the contract moved to closure. But if you look at Feb 09's differential to Dec 16, it still looks narrower than what we saw between Jan 09 and Dec 16 a month ago. That said, the contango is still steep as all hell.
For the record, the differential between Jan 09 and Dec 16 is $41.58/b, or 122.8% of the price of front month. The differential between Jan 09 and Jan 10 is $22.10/b, or 65.2% of front month!
Below is the price of crude (left-hand side) versus the interbank exchange rate of the euro and the dollar and sterling and the dollar (both of which are right-hand scale). As has been suggested, crude should become more expensive as the dollar loses value relative to world economies. Lack of storage and financing troubles are apparently preventing the realignment. The Euro has appreciated 15.3% versus the dollar since November 21; Sterling has appreciated 3.4% in that time.
For the hell of it, I've added a chart on the yen dollar interbank exchange rate (right hand scale) vs Jan 09 CL (left hand scale). Since CL Jan 09 became front month, on November 21, it has lost 32.2% of its value. (If you think that Feb 09 better represents the price of light sweet crude today, crude has lost 15.2% from November 21.) The yen has appreciated $0.000859 since November 21, or 8.2%.
The commitment of traders report for the week ended December 16 should indicate that prices will rise. Commercials are net short, which suggests they are hedging against a fall in price, and non commercials are net long, which suggests that they are betting on a rise in price. 5.49% of open interest held is held by traders net long or short--percentages we haven't seen since April and May. Historically, these percentages are very unusual in any case, although we have seen a lot of them this year.