What is Backwardation in the Crude Oil Futures Market Telling Us?

Andrew Hecht

Tue, May 19, 2026 at 3:00 PM EDT 5 min read

I concluded an April 16, 2026, Barchart article on the crude oil futures market with the following:

Expect volatility in crude oil prices over the coming days, weeks, and perhaps months, depending on developments in the Middle East. While historical trading patterns suggest an eventual implosive move, prices could rise before then. Moreover, the current environment supports wide price ranges with prices closely following the daily news cycle. Trading crude oil is optimal in the current environment. 

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Nearby NYMEX crude oil futures were at $92.57 per barrel on April 15, while nearby Brent futures were at $95.40 per barrel. Prices have been volatile over the past month, but the WTI and Brent futures were higher than the April 15 level on May 18.

Choppy price action in WTI and Brent futures

On February 27, 2026, the day before the U.S. and Israel launched attacks in Iran, nearby NYMEX crude oil futures settled at $67.02 per barrel. On December 16, 2025, the price reached a low of $54.89 per barrel.

The daily continuous NYMEX WTI futures chart shows that the price spiked to a high of $119.48 on March 9, 2026, and while the energy commodity has made lower highs since the high on March 9, the price was above $107 on May 18, and has been trading around the $100 pivot point since mid-March.

On February 27, 2026, nearby ICE Brent crude oil futures settled at $72.87 per barrel. On December 16, 2025, the price reached a low of $58.72 per barrel.

The daily continuous ICE Brent futures chart shows that the price spiked to a high of $119.40 on March 9, 2026, and while the energy commodity has made lower highs since the high on March 9, the price was near $111 on May 18, and has been trading around the $105 pivot point since mid-March.

Backwardations in forward curves

Backwardation is a condition in which the term structure of a commodity market is inverted, meaning that prices for deferred delivery are lower than those for nearby delivery. Backwardation signals short-term supply fears, but they believe that the higher prices will lead to increased production and lower prices in the long term.

The forward curve shows that NYMEX WTI crude oil for June 2026 delivery is trading at a $20.65 premium to June 2027 delivery and a $34.47 premium to June 2028 delivery.