Brent Futures Flip to Backwardation as Middle East Supply Risks Return

The Brent Crude futures curve flipped into backwardation this week, signaling expectations of tight prompt supply for the first time in a month, as the market started pricing in the renewed hostilities in the Middle East, collapsed tanker traffic through the Strait of Hormuz, and the reinstated U.S. naval blockade on Iranian oil exports.

The September contract at $85.79 per barrel early on Wednesday was about $8 per barrel higher than the Brent contract six months later, which traded at $77.49 a barrel.

The futures curve this week flipped to backwardation,…