Impacts of WTI Crude Futures Trading in Backwardation During Supply Shortages
Impact of Recent Conflicts on Oil Futures
Following the outbreak of hostilities involving the United States, Israel, and Iran on February 28, the crude oil futures market has shifted sharply into backwardation. This trend has continued even after a brief ceasefire was declared on April 7.
For example, contracts for WTI crude oil scheduled for delivery in December 2026 have traded up to $40 lower than those for delivery in May or June, as illustrated in Figure 1. This pricing pattern indicates that market participants anticipate the current supply interruptions—primarily due to the closure of the Strait of Hormuz—will be temporary. As a result, spot prices are expected to potentially decline to the mid-$70s by the end of the year.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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