Charting Opportunity in ‘Backwardated’ Oil Markets

Charting Opportunity in ‘Backwardated’ Oil Markets

Charting Opportunity in ‘Backwardated’ Oil Markets


Crude oil markets are said to be “backwardated” when spot and nearer-term futures prices exceed those for contracts further out, creating a downward-sloping futures curve – essentially the opposite of contango markets, as the chart shows. Why is this important? Backwardation tends to indicate tightening supply and can give rise to positive “roll yield” opportunities for commodity investors – the ability to generate returns by rolling a higher-priced short-term contract into a lower-priced longer-term contract. In this way, a backwardated curve provides a potential boost to commodity investors and broader commodity indexes.

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