Conventional oil wisdom holds that a backward-dated structure reflects tight underlying fundamentals, while contango implies a well-supplied physical market. Viewed from this angle, it is blatantly obvious – as illustrated in the chart showing the curve of the CME Group flagship Crude Oil contract as of the close of business on February 3, 2026, – that the U.S. crude oil market, and by extension the international one, is expected to become considerably looser after April 2027 and to remain so through December 2029.

The current trading environment, however, is anything but conventional. It may well turn out that the contango observed beyond April 2027 proves to be inaccurate. Three factors potentially support this view.

First, empirical evidence suggests that over the past year or so, the crude oil curve has consistently appeared backward-dated in the front months and has remained so. In other words, market participants have repeatedly reassessed – and revised – their expectations of a looser oil balance further out along the curve.

Second, the significant shift in the global approach to climate change is likely to have a profound impact on demand assumptions. Demand forecasts may be underestimated and therefore revised upwards. At the same time, the lack of investment in exploration and production over the past decade – when the transition from fossil fuels to renewable energy was expected to occur far more rapidly than it has – raises the risk of a supply shortfall. Demand growth is likely to prove more resilient than previously estimated, while producers must replace 4% – 6% of existing supply each year due to natural decline rates.

Third, the U.S. energy landscape underscores the economy’s increasing reliance on fossil fuels, and oil in particular. The AI industry offers the most striking example. Its rapid expansion, concentrated in the world’s largest economy, is driving a massive build-out of data centres and a sharp rise in electricity demand. Power consumption is estimated to increase by around 25% through 2030, with the bulk of incremental demand met by LNG, in line with the current administration’s energy-independence agenda. This will directly and positively affect the middle of the barrel and, in a broader sense, crude oil demand.

Taken together, these factors make a strong case that longer-dated WTI spreads – from the second half of 2027 through to the end of 2029 – will struggle to remain in contango. For example, the December 2028/December 2029 spread, which settled at –89 cents per barrel on February 3, may ultimately flip into a meaningful backwardation.