Brent Curve Steepens as Products Lead the Rally

Brent and WTI futures extended their move higher on 18 August 2026, with the front of the curve leading and ICE gasoil rallying even more strongly. The term structure shows pronounced backwardation, signalling tight nearby supply and firm physical demand, particularly in middle distillates.

Brent October 2026 settled just above USD 91/bbl, around 9–10 USD higher than contracts from late 2028 onward, while WTI shows a similar but slightly flatter profile around USD 85/bbl front-month. ICE low-sulphur gasoil gained over 2% across the forward strip, underscoring strong refining margins for distillates. Recent inventory commentary points to ongoing draws in US commercial stocks and continued SPR releases, reinforcing the impression of a fundamentally tight prompt market despite stable US production and resilient Asian demand.

Prices & Term Structure

Brent October 2026 closed at USD 91.33/bbl, up 0.46 USD on the day, with November at 89.76 and December at 87.71. The curve remains clearly backwardated, with prices sliding steadily towards roughly USD 73–74/bbl by late 2029 and the low USD 60s by 2032–2035. WTI shows the same pattern: September 2026 at USD 85.27/bbl, easing to the high 60s by 2029 and the mid‑50s by the mid‑2030s.

In refined products, ICE gasoil September 2026 settled near USD 1,309/t, up 2.25% on the day, with the nearby strip all gaining around 2–2.6%. This outperformance versus crude points to robust distillate cracks and strong demand for diesel and heating fuels into the autumn, particularly in Europe.

Note: EUR approximations assume EUR/USD ≈ 1.10.

Supply, Demand & Inventories

Recent weekly EIA data and market commentary point to a sequence of sizeable US crude draws since early Q2, only recently interrupted by a small build. Commercial crude and product stocks remain below levels seen earlier in the year, while the US Strategic Petroleum Reserve has continued to decline, with holdings slipping below 300 million barrels in early August.

On the demand side, market participants highlight resilient Asian consumption, with no material crude demand destruction seen in China despite macro concerns. Meanwhile, refinery runs remain high into the end of the northern hemisphere driving season, sustaining strong call on crude and especially on diesel-rich barrels. This combination of firm consumption and constrained visible inventory builds underpins the current backwardation.

Curve Signals & Fundamentals

The Brent curve shows roughly USD 17–18/bbl of backwardation between October 2026 (around USD 91/bbl) and early 2030 (around USD 71–72/bbl), and more than USD 30/bbl versus long‑dated 2035 contracts. WTI exhibits a comparable shape with a slightly narrower front‑end spread. Such steep structure is a classic signal of tight prompt balances and incentivises destocking of above‑ground inventories.

In parallel, second‑month futures in both WTI and Brent have recently been outperforming front‑month contracts, suggesting some short‑covering and a rebalancing of positioning along the curve rather than purely spot‑driven buying. Strong gasoil prices and distillate cracks indicate that refiners are rewarded for maximising middle distillate yields, which should sustain robust crude runs as long as product demand and margins hold.

Short-Term Outlook & Trading Ideas

With pronounced backwardation and strong distillate cracks, the short‑term bias for front‑month Brent and WTI remains moderately bullish, albeit with growing sensitivity to macro and risk‑asset corrections. Continued SPR draws and low commercial stocks leave little buffer against potential supply disruptions, keeping downside limited as long as demand holds up.

• Producers: Consider layering in hedges in the USD 85–90/bbl Brent area for late‑2026 and 2027, while keeping some upside open given tight fundamentals.
• Consumers (refiners, airlines, transport): Use current backwardation to secure forward barrels in 2028–2030 where prices fall into the low‑ to mid‑70s USD/bbl (≈ low‑ to mid‑60s EUR), balancing price risk with inventory and credit constraints.
• Traders: The front‑end Brent/WTI time spreads remain attractive for carry‑unwinding strategies; focus on long nearby vs short deferred positions, but manage risk tightly around weekly inventory releases and macro data.

3‑Day Directional View (Key Benchmarks)

• ICE Brent front‑month: Slightly higher to sideways in EUR terms; dips towards the high‑70s EUR/bbl likely to find buying interest.
• NYMEX WTI front‑month: Tracking Brent; expected to hold in the mid‑70s EUR/bbl range with modest upside bias.
• ICE Gasoil front‑month: Elevated and volatile; scope for further outperformance vs crude if refinery or logistics issues emerge.