Oil futures curves have been in backwardation – when the closer futures contract can be sold for a higher price than it costs to buy a futures contract with a further expiry date, resulting in a profit for the investor – for most of the past year, driven by perceived tightness in short-term supply1. This has provided investors with ‘roll yield’ on top of the gains made from spot price movements in oil.
While we believe that the oil market is balanced at present, there is supply tightness in specific areas – especially in heavier crudes – and this could be enough to ensure that the oil futures curve remains mostly in backwardation going forward. Here’s a closer look at current oil market supply and demand dynamics.
Oil curve backwardation
Recent curve backwardation has largely been engineered by the Organisation of Petroleum Exporting Countries (OPEC). Since January 2017, the oil cartel has restricted the supply of oil by assigning its members and partners a quota for the amount of oil that they produce. Although the cartel has historically had a poor history of complying with quotas, this time it has done exceptionally well. Part of the reason for this, is that up until June 2018, each country was allocated an individual quota (rather than a group-wide limit) and this helped to restrict oil supply.
Another reason OPEC has done well in complying with quotas is because of unintended production disruptions. Recently, Venezuela has experienced an economic implosion, and this has impacted oil production significantly. Supply disruptions in Libya and Nigeria have also contributed to OPEC supply volatility.
Can backwardation last?
In June 2018, OPEC abandoned individual country quotas, so the level of quota compliance that we have seen over the past year may not last if the organisation reverts to its old ways. This could explain why the very front of the Brent futures curve went back into contango – when it costs more to buy the new futures contract than the amount received from selling the old futures contract – in July and August. Indeed, Saudi Arabia – the largest OPEC nation – has clearly expanded production since the end of the country-quota system, as have other countries.
After going back to an all-backwardated curve, the short end of the curve is now back in contango, a move underpinned by fears of over supply from increasing rig count in the US, as well as delays in the full implementation of sanctions on Iran. Despite those recent developments, we do not expect them to significantly impact long term supply. While the front end of the curve will remain prone to shifts, we do not see it to durably get back to a mostly contangoed curves.
Figure 1: Year-on-year difference in OPEC oil production
Source: Bloomberg, WisdomTree, data available as of close 05 October 2018. Historical performance is not an indication of future performance and any investments may go down in value.
Tightness concentrated in heavy crudes
In relation to supply disruption, supply of the ‘heavier’ crudes is most at risk, in our view. Venezuela, Iran and Canada produce ‘heavy’ (low API gravity), ‘sour’ (high sulphur) crudes and these countries experienced the bulk of supply disruption this year.
Most of the world’s growth in crude oil supply is currently from US tight oil, which is ‘light’ (high API gravity) and ‘sweet’ (low sulphur). So, even though global oil supply is close to balance at the headline level, growth in oil production is uneven, with declines in supply of heavy crudes, and gains in supply of light crudes2.
Moreover, while US tight oil is seeing supply growth, there are limitations to this growth. Infrastructure needs to grow in lock-step with growth in oil production, and infrastructure limitations could slow the pace at which US shale can help satisfy global oil needs.
Demand remains strong for now
Looking at forecasts from the International Energy Agency (IEA), demand for oil looks set to remain healthy, with the IEA expecting oil demand to grow by 1.4 mb/d in 2018, and 1.5 mb/d in 2019 (following 1.5 mb/d growth in 2017). Over the medium term, the dearth of capital investment in oil production is likely to lead to tightness if demand continues to remain robust.
Oil futures likely to remain in backwardation
While we believe that the market is in balance at present, there is supply tightness in specific areas and this could be enough to ensure that the futures curve remains mostly in backwardation.
We don’t believe that a new wave of supply is forthcoming as a lack of investment in oil exploration and production should keep supply contained, and it may only take another supply shock to Libya or to Canada to cast doubts on supply. We also think that demand will remain robust, assuming today’s bullish demand expectations are not unfounded.
Source
1 For a full description of backwardation, contango, roll yields, spot return, total return, excess return and collateral yield please see Costs and Performance Tab on our ETPedia page.
2 Energy Information Administration, WisdomTree, data available as of 04 October 2019.
This material is prepared by WisdomTree and its affiliates and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date of production and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by WisdomTree, nor any affiliate, nor any of their officers, employees or agents. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of future performance.
Michael Saylor’s bold Bitcoin bet and Strategy’s risk analysis
Bitcoin price technical analysis: Where are the liquidation levels?
What are real-world assets and why do we need tokenization?
Michael Saylor’s bold Bitcoin bet and Strategy’s risk analysis
Strategy (formerly MicroStrategy) has amassed a staggering $43 billion in Bitcoin, positioning itself at the forefront of the corporate “reserve race.” Under the leadership of Bitcoin maximalist Michael Saylor, the company now boasts an $84 billion market cap. But with such an aggressive strategy, how sustainable is its approach—and what risks lie ahead? We break it down in today’s analysis.
Bitcoin price technical analysis: Where are the liquidation levels?
A drop below $72,000 could flush longs, while a breakout above $90,000 may squeeze shorts. One key positive indicator is that Bitcoin continues to print higher lows since March 10, which preserves a bullish market structure in our view. Dive into our technical analysis.
What are real-world assets and why do we need tokenization?
Imagine owning a slice of a skyscraper or a piece of fine art with just a few clicks. Tokenization, the act of converting ownership rights to real-world assets (RWAs) into tradable tokens, has surpassed $10 billion in on-chain value, unlocking global 24/7 access to once-exclusive markets with liquidity, efficiency, and yield. Find out how it works.
Research Newsletter
Each week the 21Shares Research team will publish our data-driven insights into the crypto asset world through this newsletter. Please direct any comments, questions, and words of feedback to research@21shares.com
Disclaimer
The information provided does not constitute a prospectus or other offering material and does not contain or constitute an offer to sell or a solicitation of any offer to buy securities in any jurisdiction. Some of the information published herein may contain forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those in the forward-looking statements as a result of various factors. The information contained herein may not be considered as economic, legal, tax or other advice and users are cautioned to base investment decisions or other decisions solely on the content hereof.
Invesco BulletShares 2030 EUR Corporate Bond UCITSETF EUR Acc (BSE0 ETF) med ISIN IE000I25S1V5, försöker följa Bloomberg 2030 Maturity EUR Corporate Bond Screened-index. Bloomberg 2030 Maturity EUR Corporate Bond Screened Index följer företagsobligationer denominerade i EUR. Indexet speglar inte ett konstant löptidsintervall (som är fallet med de flesta andra obligationsindex). Istället ingår endast obligationer som förfaller under det angivna året (här: 2030) i indexet. Indexet består av ESG (environmental, social and governance) screenade företagsobligationer. Betyg: Investment Grade. Löptid: december 2030 (Denna ETF kommer att stängas efteråt).
Den börshandlade fondens TER (total cost ratio) uppgår till 0,10 % p.a. Invesco BulletShares 2030 EUR Corporate Bond UCITSETF EUR Accär den billigaste och största ETF som följer Bloomberg 2030 Maturity EUR Corporate Bond Screened index. ETFen replikerar det underliggande indexets prestanda genom samplingsteknik (köper ett urval av de mest relevanta indexbeståndsdelarna). Ränteintäkterna (kupongerna) ackumuleras och återinvesteras.
Invesco BulletShares 2030 EUR Corporate Bond UCITSETF EUR Acc är en mycket liten ETF med tillgångar på 6 miljoner euro under förvaltning. Denna ETF lanserades den 18 juni 2024 och har sin hemvist i Irland.
Produktbeskrivning
Invesco BulletShares 2030 EUR Corporate Bond UCITSETFAccsyftar till att ge den totala avkastningen för Bloomberg 2030 Maturity EUR Corporate Bond Screened Index (”Referensindexet”), minus avgifternas inverkan. Fonden har en fast löptid och kommer att upphöra på Förfallodagen.
Referensindexet är utformat för att återspegla resultatet för EUR-denominerade, investeringsklassade, fast ränta, skattepliktiga skuldebrev emitterade av företagsemittenter. För att vara berättigade till inkludering måste företagsvärdepapper ha minst 300 miljoner euro i nominellt utestående belopp och en effektiv löptid på eller mellan 1 januari 2030 och 31 december 2030.
Värdepapper är uteslutna om emittenter: 1) är inblandade i kontroversiella vapen, handeldvapen, militära kontrakt, oljesand, termiskt kol eller tobak; 2) inte har en kontroversnivå enligt definitionen av Sustainalytics eller har en Sustainalytics-kontroversnivå högre än 4; 3) anses inte följa principerna i FN:s Global Compact; eller 4) kommer från tillväxtmarknader.
Portföljförvaltarna strävar efter att uppnå fondens mål genom att tillämpa en urvalsstrategi, som inkluderar användning av kvantitativ analys, för att välja en andel av värdepapperen från referensindexet som representerar hela indexets egenskaper, med hjälp av faktorer som index- vägd genomsnittlig varaktighet, industrisektorer, landvikter och kreditkvalitet. När en företagsobligation som innehas av fonden når förfallodag kommer kontanterna som fonden tar emot att användas för att investera i kortfristiga EUR-denominerade skulder.
ETFen förvaltas passivt.
En investering i denna fond är ett förvärv av andelar i en passivt förvaltad indexföljande fond snarare än i de underliggande tillgångarna som ägs av fonden.
”Förfallodag”: andra onsdagen i december 2026 eller sådant annat datum som bestäms av styrelseledamöterna och meddelas aktieägaren
Det betyder att det går att handla andelar i denna ETF genom de flesta svenska banker och Internetmäklare, till exempel DEGIRO, Nordnet, Aktieinvest och Avanza.
Since President Trump appointed Mark Uyeda as acting SEC chair two months ago, many investigations into crypto businesses have been dropped, as the SEC moves away from regulation by enforcement and works to create a framework for digital assets. As regulations become clearer and news flow turns more positive, crypto prices—which dropped sharply this week—should begin to better reflect the new regulatory landscape in the US.
We believe this regulatory shift could ultimately help trigger the next leg of the current bull run, as investors better understand the significance of regulatory clarity and seek to acquire bitcoin and altcoins at what we believe are currently very favorable levels.
Market Highlights
SEC Dismisses Crypto Enforcement Actions
The SEC dropped its enforcement actions against crypto-related companies Kraken, Consensys, and Cumberland DRW.
This indicates a shift in SEC’s regulatory approach, favoring clearer guidelines over enforcement actions. Such a pivot could foster a more predictable environment, encouraging innovation within the sector.
Banks to Engage in Crypto Activities
The FDIC has rescinded previous guidelines which prevented financial institutions from engaging with crypto activities without prior sign-off.
By removing bureaucratic hurdles, banks may more readily offer crypto-related services, potentially leading to broader adoption and integration of digital assets.
Bitcoin ETFs Inflow Streak Surpassed $1 Billion
US spot Bitcoin ETFs have recorded a 10-day inflow streak exceeding $1 billion marking the longest such streak in 2025.
This underscores growing institutional and retail investor confidence in Bitcoin as an asset class that helps increase market stability and possibly paving the way for the approval of other crypto-based financial products.
Market Metrics
All NCITM constituents had negative performance last week, with XRP (-10.8%) and UNI (-10.7%) seeing the steepest declines. ETH also experienced a sharp drop (-9.1%), contributing to NCITM’s underperformance relative to BTC (-2.9%). The NCITM -4.2% decline reflects a broader risk-off sentiment in the crypto market, as investors reassess their positions amid ongoing macroeconomic uncertainties.
NCITM (-4.2%) extended its underperformance last week, deepening year-to-date losses. Traditional indices like the S&P 500 (-1.5%) and Nasdaq 100 (-2.4%) saw smaller declines. The gap between crypto and other risk assets continues to widen, while gold has emerged as the top performer in 2025, gaining nearly 20% amid ongoing macroeconomic uncertainties. This trend highlights a growing risk-off sentiment, with investors shifting toward defensive assets and away from high-volatility investments.