Oil Futures Retreat from War Highs but Forward Curve Stays Firmly Backwardated

Crude oil futures have pulled back 2–3% across the front of the curve but remain deeply backwardated, signalling persistent near-term tightness despite easing war premiums. Refined products, especially low-sulphur gasoil, have corrected even more sharply, pointing to a normalization of extreme middle distillate cracks.

After the violent spike above 100 USD/bl earlier in March on Iran war fears, both WTI and Brent front months are now trading back in the low 90s and just above 100 USD/bl respectively, still well above pre-crisis levels. The curve shows a steep decline towards the low/mid‑70s USD/bl by late 2027 and around the low‑60s by the early 2030s, in line with earlier investment bank expectations for a medium‑term reversion towards 60 USD/bl on Brent. Positioning and volatility remain elevated, but the latest session suggests a market that is starting to re-price extreme supply‑disruption risks while still rewarding prompt barrels.

📈 Prices & Curve Structure

The latest settlement on March 25, 2026 shows clear downside correction but pronounced backwardation:

• WTI May 2026 settled at 90.32 USD/bl (≈ €82/bl at 1.10 USD/EUR), down 2.03 USD or 2.25% day‑on‑day.
• Brent May 2026 closed at 102.22 USD/bl (≈ €93/bl), down 2.27 USD or 2.22%.
• ICE Gasoil April 2026 dropped 9.53% to 1182.75 USD/t (≈ €1,075/t), with the forward strip falling to around 960–1,050 USD/t for Q2 2026 (≈ 875–955 €/t).

Contract	Expiry	Last Settlement (USD)	Approx. Price (EUR)	D / D Change
WTI May 2026	Near month	90.32 / bl	≈ 82 / bl	-2.25%
Brent May 2026	Near month	102.22 / bl	≈ 93 / bl	-2.22%
ICE Gasoil Apr 2026	Prompt	1182.75 / t	≈ 1,075 / t	-9.53%

The WTI curve declines from about 90 USD/bl in May 2026 to ~73 USD/bl by mid‑2027 and ~60 USD/bl by 2033, implying a backwardation of nearly 30 USD/bl over seven years. Brent shows a similar pattern, with May 2026 around 102 USD/bl and late‑2029 contracts closer to the low‑70s.

🌍 Supply, Demand & Geopolitics

The current structure is dominated by the aftermath of the Iran war and the Strait of Hormuz crisis, which pushed Brent briefly to around 120 USD/bl in early March before authorities signalled de‑escalation and potential release of sanctions‑constrained barrels from floating storage. Such emergency measures and softer rhetoric have deflated part of the war premium but not erased underlying supply risk.

Open interest data from the U.S. futures complex confirms very high activity and recent long liquidation after the price spike, with CL open interest falling by over 40,000–70,000 contracts across late‑March reports. Physical balances remain tight in the Atlantic Basin as Middle East exports are periodically disrupted and refinery runs stay high to capture still‑elevated middle distillate margins, even after the sharp correction in gasoil futures.

📊 Fundamentals & Product Spreads

The steep backwardation in both crude and gasoil reflects immediate scarcity of prompt barrels and strong refinery incentives to process crude now rather than in the future. Front‑month gasoil still prices at a significant premium to later deliveries, but the curve from April 2026 onward falls steadily from ~1,180 USD/t to below 700 USD/t by late 2029, a cumulative drop of more than 40%.

Compared with crack spread data from 2025, middle distillate cracks are now coming off extreme highs, with prior months already showing double‑digit percentage declines in diesel and jet fuel margins year‑on‑year. The recent 8–10% one‑day fall in gasoil suggests that part of the crisis‑driven spike in refining margins is being unwound as traders reassess the duration and severity of export disruptions from the Middle East.

🌦️ Weather & Short-Term Demand Signals

Into late March, the Northern Hemisphere is exiting the core heating season, reducing structural demand for heating oil and diesel in Europe and North America. This seasonal downswing amplifies the impact of any macro or geopolitical de‑escalation on refined product prices, as seen in the outsized drop in gasoil relative to crude.

On the demand side, macro uncertainty around global growth and high retail fuel prices may curb consumption, particularly in emerging Asia, which is highly exposed to Middle East supply shocks. However, the still‑elevated flat price of crude and the backwardated structure indicate that real physical tightness remains for the coming quarters, even if peak panic has faded.

📆 Outlook & Trading Strategy

• Short term (next days to weeks): Expect continued high intraday volatility, but with a bias towards consolidation in WTI between roughly 80–95 USD/bl (≈ 73–86 €/bl) and Brent around 90–105 USD/bl (≈ 82–95 €/bl) as markets digest policy responses and newsflow from the Gulf.
• Curve trades: The very steep backwardation offers attractive roll yield for producers and consumers hedging forward sales or purchases; locking in deferred prices in the low‑70s USD/bl (≈ low‑60s €/bl) out to 2029–2032 can significantly reduce budget risk if war‑related tightness persists.
• Refining & product risk: After the near‑10% correction in prompt gasoil, refiners should reassess hedge ratios: maintaining some protection on middle distillate cracks remains prudent, but the risk‑reward for adding fresh length in gasoil is less compelling than earlier in the month.
• End‑users (transport, agriculture, industry): Consider layering in medium‑term hedges on crude and diesel where internal economics remain positive, focusing on 2027–2029 tenors where EUR‑equivalent prices are far below current spot levels.

📍 3‑Day Directional View (EUR)

• WTI (NYMEX) front month: Bias for choppy sideways to slightly lower trade in a broad band equivalent to ~75–85 €/bl as recent longs continue to trim exposure.
• Brent (ICE) front month: Likely to track WTI with a stable premium of about €8–12/bl, trading roughly in an 85–98 €/bl corridor absent fresh escalation.
• ICE Gasoil (diesel): After the steep one‑day drop, scope for further modest downside or consolidation around 1,000–1,100 €/t as markets test how quickly physical diesel tightness eases.