The primary cause of backwardation in the commodities' futures market is a shortage of the commodity in the spot market. Manipulation of supply is common in the crude oil market. For example, some countries attempt to keep oil prices at high levels to boost their revenues.

Is backwardation bullish for oil?

Among the most notable shifts in the oil market this year has been a move of the oil futures curve further into a bullish pattern known as backwardation.

What does backwardation in oil mean?

Backwardation means the current value is higher than prices for later months and encourages traders to draw down oil supplies and sell promptly. ... Higher futures prices and reduced stocks point to a balance between supply and demand, but likely producer moves towards more production could upset the equilibrium.