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There’s a glut of supply, which creates a contango forward structure (contango means that future price is higher than the spot price). Producers, who would otherwise be tempted to cut supply and suffer income loss, are encouraged by banks to keep producing on the basis that they can use their inventory as collateral for secured financing.

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The encumbered collateral (inventory)is kept off market — (much like ECB periphery bonds) — and hedged which derivatives, which due to the contango structure, end up yielding a positive return for banks.

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You could call it balance sheet rental to producers and traders for the sake of funding inventory (and/or contango positions in their own right) to take advantage of the mispricing of the curve. After all, the reason banks are able to make these deals profitable is because they bridge the difference between the physical reality and financial investors’ (especially passive ones) overpriced expectations of where commodity prices will be in the future.

Hence why I say this isn't speculation, they are just essentially short contango which results in a positive roll yield (they sell higher future commodities prices and buy when they are lower at spot, there is a little convolution in that explanation but the concept is true). However, there are problems with this which they note here:

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The problem is that the off market collateralisation only creates information asymmetry across the market, making it impossible for traders to gauge the true clearing price based on physical supply and demand fundamentals.
In the aluminium market it’s also gone to the other extreme by pushing up premiums for physical spot supply, while adding to volatility more widely — since the trade now responds not only to contango, but to the opposite scenario which is backwardation. Thus when the market backwardates, traders release off-market supply (non-LME) to take advantage of physical premiums. When it goes back to contango, they simply flip back to storage mode. And we are told it only takes as much as a label switch on the inventory within the warehouse to exploit the market changes efficiently

The key is information asymmetry which makes the true supply/demand transparency almost impossible for anybody trading the commodity.