"Unlike trading in gold/silver which is relatively straightforward, trading in oil gets complicated due to contango/backwardation effect at rollover. In view of this, what are your thoughts on whether it would be wise to ever consider taking a medium term (6-12 month) trading position in oil futures?

David Fuller's view Interesting question and my answer depends very much on how you might trade it given the medium to longer-term trend.

For instance, Eoin and I have often mentioned that we do not like oil trackers for long positions. The biggest one is the United States Oil Fund (USO US) - current capitalisation $43bn, according to Bloomberg. Holders have been hammered by the contango, as you can see from the weekly chart.

It may look like a base but will probably remain rangebound more often than not. This chart of crude oil with a USO overlay shows why we would much prefer nearby futures contracts when playing the long side. I am not sure whether the dramatic underperformance since 2009 is due to the size of USO, traders anticipating their rollovers, or some other factor. If someone in the Collective knows the answer, we would welcome your thoughts.

Whatever, USO looks like a good vehicle to short when we next think that crude oil is in a bear market. That is not the case today, although it is susceptible to some additional mean reversion towards the rising MA.