AI for Commodities Trading: Calendar Spreads and Storage Arbitrage

Commodities Trading and AI

Commodity markets combine physical supply and demand fundamentals with financial derivatives. Calendar spread trading and storage arbitrage are core strategies for commodity traders and merchants. ClaudeFinLab's valuation MCP server includes commodity pricing models that extend Claude into structured commodity analysis.

Calendar Spread Analysis

A calendar spread is the simultaneous purchase and sale of futures contracts for the same commodity but different delivery months. Spreads reflect the cost of carry (storage + interest) minus convenience yield:

• "Natural gas front month (October) is $2.85/MMBtu. December contract is $3.10. Is this spread in contango or backwardation? What does this imply about storage economics?"
• "WTI crude oil: spot $78/bbl, 3-month future $80/bbl, 6-month future $81.50/bbl, 12-month future $83/bbl. Calculate the annualized carry implied by each spread. Is the curve profitable to store into?"

Storage Arbitrage Modeling

Storage arbitrage is buying a commodity today, storing it, and selling a forward contract to lock in a profit over the storage period:

• "Model a natural gas storage arbitrage: buy prompt $2.80/MMBtu, inject into storage today, sell December futures at $3.15. Storage cost: $0.08/MMBtu/month for 4 months, interest at 5.5% annualized. What is the net profit per MMBtu? What is the break-even forward price?"
• "Crude oil storage arb: WTI spot $78/bbl, 6-month forward $82/bbl. Tank storage: $0.60/bbl/month. Financing at 6%. What is the net profit per barrel? At what storage cost does this deal become uneconomic?"

See the full Commodity Storage Arbitrage skill for the complete model.

Futures Curve Shape Analysis

The shape of the futures curve (contango vs backwardation) signals supply/demand dynamics:

• "Analyze this WTI futures curve: [paste 12 monthly contract prices]. Is it in contango or backwardation? What is the roll yield for a long position rolling monthly? How does this compare to historical norms?"
• "Gold futures show a steep contango: spot $2,050/oz, 3-month $2,080, 6-month $2,110. What interest rate is implied by the curve? Is this consistent with current SOFR?"

Commodity Price Risk Management

Producers, consumers, and merchants all need to manage commodity price exposure:

• "We're a natural gas producer with 12-month production of 10,000 MMBtu/day. We want to hedge 70% of production using futures. Current 12-month strip average: $3.05. Structure a rolling hedge program and calculate the hedge ratio by month."
• "We're an airline with 500M gallons of jet fuel exposure per year. Jet fuel tracks crude oil at a 60% correlation. Design a partial crude oil hedge using options that limits our exposure to $95/bbl on the upside while preserving benefit below $75/bbl."

Basis Risk Analysis

Physical commodity traders face basis risk — the difference between the spot price at a specific location and the futures price:

• "Henry Hub natural gas is $2.80. Waha Hub (West Texas) is $2.20. Transco Zone 6 (Northeast) is $3.40. What is the basis for each location vs Henry Hub? What does the basis differential imply about pipeline capacity and demand?"
• "Model a basis hedge: I'm long physical gas at Waha and short Henry Hub futures. If the Waha basis narrows from -$0.60 to -$0.30 over the hedge period, what is my P&L?"

Energy Transition Commodities

New commodity markets in carbon credits, lithium, and rare earths follow similar analytical frameworks:

• "European carbon allowances (EUAs) are trading at €65/tonne. What is the implied carbon cost per MWh for a gas-fired power plant running at 50% efficiency? At what carbon price does coal become more expensive than gas-fired power generation?"

Setting Up for Commodities

{
  "mcpServers": {
    "claudefinlab-valuation": {
      "url": "https://claudefinancelab.com/valuation/sse",
      "headers": { "Authorization": "Bearer YOUR_API_KEY" }
    },
    "claudefinlab-market": {
      "url": "https://claudefinancelab.com/market/sse",
      "headers": { "Authorization": "Bearer YOUR_API_KEY" }
    }
  }
}

Related Skills

• Commodity Storage Arbitrage Modeler
• Futures Curve Roll Yield Analyzer
• Energy Basis Risk Calculator