Five-year U.S. crude oil futures at record $30 premium

LONDON (Reuters) - U.S. crude oil futures for delivery in January 2014 are trading at a record $30 premium to current contracts, as investors bet that the long-term trend toward higher prices will remain intact despite oil’s slump to $50 a barrel.

U.S. crude oil futures -- the global benchmark for oil prices -- have collapsed by almost $100 a barrel since hitting an all time high above $147 a barrel in July. On Friday, U.S. crude for delivery in January 2009 sank to as low as $48.50 a barrel, the weakest price since May 2005.

But oil contracts for delivery in five years time have held stubbornly above $80 a barrel, with the January 2014 contract currently sitting at $81.26 a barrel.

Long-dated oil future contracts are seen as a gauge of how expensive the market thinks oil will be in five years time, and many investors believe that as the global economy recovers from its current malaise, crude prices will soar once again.

“There’s not a lot of demand out there at the moment, but you’ve got to hope the economic situation will be very different by 2014,” said Sucden trader Rob Montefusco.

“Oil’s spike to almost $150 a barrel was based in large part on tight supplies and growing expectations for demand from China and India. That’s still going to come, and now there’s even less investment in future oil production due to the double whammy of weaker prices and the credit crunch, supplies could be even tighter in the coming years.”

Historically, the correlation between the current oil price and the five-year price has been much closer. From May 2005 until July of this year, the difference between the two contracts was never more than $10 a barrel, and averaged around $6 a barrel.

Analysts said that long-dated contracts were also reflecting the marginal cost of production -- or the price of getting a barrel of oil out of the ground from complex projects such as deep water wells off the coast of Brazil or Canadian oil sand projects.

A larger proportion of the world’s oil supplies are expected to come from more expensive projects in the coming years, with much of the easily accessible oil with lower production costs already exploited.

Reporting by David Sheppard; Editing by James Jukwey