Front-month U.S. crude oil futures ended Monday’s trading at their smallest premium since January 2024 over the seventh-month contract, as OPEC+ ramps up supply while seasonal refinery maintenance in the U.S. pressures demand for prompt barrels. Narrowing backwardation, the market term for immediate deliveries fetching a premium over later deliveries, suggests investors are making less money selling their oil in the spot market because near-term supply is perceived to be ample.
A reversal of the spread from a premium to a discount would put U.S. oil futures in a contango for the first time since last January.
WTI crude futures for November delivery settled at $59.49 per barrel on Monday, while the May 2026 contract settled at $59.02 per barrel, creating a 47 cent premium for prompt barrels, the narrowest since January 16 last year.
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“This narrowing is indicative of excess supplies in the near term, and then concerns that when demand increases in the future, supplies will get tighter again,” said Andrew Lipow, president of consultancy Lipow Oil Associates.
“We are seeing increased supply from OPEC+, which combined with reports of more oil in floating storage is putting pressure on the front end of the curve, as well as seasonal refinery maintenance in the U.S.,” Lipow added.
OPEC+, made up of the Organization of Petroleum Exporting Countries and its allies, has increased its oil output targets by more than 2.7 million barrels per day this year, equating to about 2.5% of global demand, stoking supply glut concerns.
This is flattening the WTI curve as the market is now pricing in less tightness in early 2026 balances, Shohruh Zukhritdinov, a Dubai-based oil trader said. Meanwhile, U.S. refinery utilization on a four-week average fell for the fourth straight week to 92.5% in the week to October 3, to its lowest since the first week of June, considered the start of the U.S. summer driving season, according to the Energy Information Administration.
“Physical builds and refinery slowdowns equate to less need to pay up for prompt barrels,” Zukhritdinov said.
(Reporting by Georgina McCartney in Houston; Editing by David Gregorio)
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