Crude oil markets are said to be “backwardated” when spot and nearer-term futures prices exceed those for contracts further out, creating a downward-sloping futures curve – essentially the opposite of contango markets, as the chart shows. Why is this important? Backwardation tends to indicate tightening supply and can give rise to positive “roll yield” opportunities for commodity investors – the ability to generate returns by rolling a higher-priced short-term contract into a lower-priced longer-term contract. In this way, a backwardated curve provides a potential boost to commodity investors and broader commodity indexes.

The Author

Nicholas J. Johnson

Porfolio Manager, Commodities

View Profile

For more charts critical to understanding markets, economics and policy, visit our Smart Charts digital library.

Related Content

Hear from Our Experts

Reset All

As Good as It Gets

We see three risks to the outlook for steady economic growth. Yet we also see opportunities for investors to target above-benchmark returns while emphasizing defense at a time of low volatility and full valuations.

Smart Charts

Access our library of economic and market charts that you can download, save and share.


All investments contain risk and may lose value. Commodities contain heightened risk, including market, political, regulatory and natural conditions, and may not be suitable for all investors. Derivatives and commodity-linked derivatives may involve certain costs and risks, such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. Commodity-linked derivative instruments may involve additional costs and risks such as changes in commodity index volatility or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments. Investing in derivatives could lose more than the amount invested.  There is no guarantee that these investment strategies will work under all market conditions or are suitable for all investors and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market. Investors should consult their investment professional prior to making an investment decision.

This material contains the opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. PIMCO is a trademark of Allianz Asset Management of America L.P. in the United States and throughout the world. ©2017, PIMCO.