4

Here's an extract of a professional newsletter in the petroleum industry. It concerns the cost of crude oil in relation to storage capacity.

“The cost of storage in the U.S. is high today because tank space is scarce and thus you have a wide contango at prompt in order to cover the cost of storing crude oil from one month to the next."

For info,

contango

is

the postponement of payment for and delivery of stock from one account day to the next

and

prompt

is used here, I think, in one of these business sense either of

the time limit allowed for payment of the debt incurred by purchasing goods or services on credit (Collins)

or

the contract specifying this time limit

or

a memorandum sent to a purchaser to remind him of the time limit and the sum due

I understand each individual word and I understand the global meaning of the sentence: It can be boiled down to "the cost of storage in the U.S. is high today because tank space is scarce"

But I don't really understand "wide contango at prompt", in the sense that I'd be at a loss to explain it to someone else.

Can you help me parse this clause ?

(i.e grammatical and semantic analysis or even say the same thing with a simpler sentence or more common words.)

Pang
  • 203
  • 4
  • 9
P. O.
  • 143
  • 5
  • 1
    Welcome to ELL! I really appreciate the amount of detail you've included in your question, so you get a +1 from me. – ColleenV Mar 03 '16 at 14:03
  • I believe "at prompt" there to be elliptical for "at prompt shipment". There would be a higher cost because to guarantee prompt availability the commodity would have to be taken from stored supply, from supply on-hand, and storage is costly. – TimR Mar 03 '16 at 14:33
  • And a wide contango would refer to a significant difference between the commodity's short-term and long-term futures price. – TimR Mar 03 '16 at 14:47
  • Here's a typical usage: Any price rallies now would be premature as the wide contango,* with forward prices well above prompt values, means that producers may be able to lock in, say, another year of forward sales above their cost of production.* But it's domain-specific jargon which means next to nothing to me as a competent native speaker, so I think it's Off Topic in the context of a site devoted to people who seek to learn "normal" English. – FumbleFingers Mar 03 '16 at 18:18
  • 1
    I'm voting to close this question as off-topic because it's opaque domain-specific terminology and usage. – FumbleFingers Mar 03 '16 at 18:19
  • @fumblefingers I read the Meta, I could not find a rule against domain-specific terminology or that ELL is only for "normal" English. Where did you read that ? Also, I gave the definitions of the words that could be problematic. It's nto a question about a domain, it's really a question of me not being able to parse a sentence whose grammar looks simple, but that escape me for some reason, as I'm not a native. Hence, asking it here. I'm trying to learn, and I felt it's too simple for ELU. – P. O. Mar 03 '16 at 19:47
  • @P. Obertelli: I appreciate that (not least because you're not a native speaker) it's not necessarily obvious to you that the usage you've cited means no more to a competent native speaker than it does to you. But since it's *you* who are reading this text (and it's clearly aimed at "industry insiders") you should already know what *contango* and *prompt* mean in this context (which most of us don't). Incidentally, a search of Google Books shows many instances of those two terms turning up in close proximity, but none at all featuring *at prompt*. It's not "normal grammar". – FumbleFingers Mar 03 '16 at 20:59
  • ...if you don't already have a clear understanding of those two words, this may help, but there's not much point in asking anyone here to explain the syntax, grammar of the specific example cited. It doesn't really have any. – FumbleFingers Mar 03 '16 at 21:01
  • Right, by saying it's not normal grammar, it helps me to understand why I don't understand it. It's the same with journalism, lot of constructions are non-grammatical (until everybody uses it). Learners have no way to understand that a particular construction coming from a reputable source is not normal, as per definition, you won't find it in a ordinary grammar book. I rarely ask questions on SE, because I usually can find the answer by googling it. I asked because I could not find the answer. – P. O. Mar 03 '16 at 21:37

1 Answers1

3

As stated in the comments to your question, this is a question about the meaning of some industry-specific jargon, so I must stress that this response is specific to petroleum industry commodities trading and includes some simplification for the purposes of clarity. These words are highly contextual and -- especially with cotango -- can refer to completely different things from one context to another.

As used in the passage, cotango is the difference between the theoretically expected price of the commodity and its actual price at a given point in time. A narrow cotango would be a small difference, a wide cotango would be a large difference.

That brings us to prompt, which here is being used to signify a very short term purchase (generally two business days). This is contrast to spot which would be immediate. To illustrate the difference: if you purchase a car and drive it off the lot, that's Spot; if you purchase a car for delivery to your home in two days time (because they didn't have the color or the features you wanted on the lot, so they'll grab it for you), that's Prompt.

So, tying that back together to answer your question, let's rephrase the sentence:

...thus you have a large difference between the (theoretical) price you would expect to pay (for storage purchased within the next two business days) and the price you'll actually have to pay (for storage purchased within the next two business days) in order to cover the cost of storing crude crude oil...

Does this make more sense?

Omnidisciplinarianist
  • 2,686
  • 15
  • 26