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Backwardation vs. contango: reading market signals
The WTI futures curve tells a story about supply, demand and storage capacity. Here's how to interpret the structure.
By HormuzEye · Independent oil & energy analysis · Rotterdam
· 6 min read
Frequently asked questions
What is backwardation in oil?
Backwardation occurs when the current spot price of oil is higher than futures contract prices further out in time. This usually signals near-term tightness: buyers pay a premium for immediate delivery.
What is contango?
Contango is the opposite of backwardation: futures prices are higher than the spot price. This often points to oversupply or expected price increases, making oil storage attractive.
What is the difference between WTI and Brent?
WTI (West Texas Intermediate) is the US benchmark, traded in Cushing, Oklahoma. Brent is the international benchmark from the North Sea and sets the price for roughly two-thirds of global oil. Brent typically trades slightly above WTI.
What does the futures curve mean for oil prices?
The futures curve shows the expected oil price per delivery month. Its shape — backwardation or contango — reveals market sentiment, supply, demand and storage capacity, and is a key signal for traders and analysts.
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