How to parse “contango at prompt”?

Question

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.)

Answer 1

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?