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Backwardation Explained: MCX Crude Oil Futures, Causes & Market Impact

08 Apr 2026|
3 min read |
by ICICI Securities Team

In commodity trading, the shape of the futures curve often reveals more about market health than current price action alone. While markets typically operate in "Contango"—where future prices are higher to cover storage costs—the current MCX Crude Oil scenario presents a textbook case of Backwardation. 

What is Backwardation?

Backwardation is a market structure where the near-month (current) futures contract price is higher than far-month future prices.

Near Month Future Price > Far Month Price

Indicate tight supply or strong immediate demand

According to CME Group, future curves shift based on market expectations, and backwardation reflect a market where immediate delivery is more valuable than future delivery.

  • Market Signal: It indicates an immediate, acute supply shortage where buyers are willing to pay a premium for "instant" delivery rather than waiting.
  • Inverted Curve: Visually, the futures curve slopes downward, suggesting that participants expect current supply tightness to be temporary. 

India's Economic Impact: For a nation importing of its crude, sustained high spot prices pressure the Current Account Deficit (CAD) and weaken the Indian Rupee. 

The MCX Crude Oil Scenario (April 2026)

As of early April 2026, the Multi Commodity Exchange (MCX) is witnessing a steep backwardation in crude oil futures, driven by severe geopolitical disruptions in the Middle East and a scramble for physical barrels. 

Current Market Data (As of April 7, 2026)

Contract Month 

Price (per barrel)

Market Structure

April 2026 (Near-Month)

₹10,650.00

Premium (Spot/Near month)

May 2026

₹9,445.00

Backwardation

June 2026

₹8,695.00 

Further Discount

Futures Prices are lower because market expects supply normalization.

Note: The prices above are indicative and used for illustrative purposes only to demonstrate the market structure.

3. Why MCX crude oil is in Backwardation right now?

  • Global Supply Disruptions: Ongoing conflict in the Middle East has severely restricted flows through the Strait of Hormuz, tightening short-term supply.
  • Strong Immediate Demand: Refineries and Industries need crude urgently, pushing up near month prices.
  • Expectation of Future stability : Despite high current prices, markets expect a resolution. Reports of a U.S.-Iran ceasefire deal have already begun cooling long-dated futures. 

Backwardation is a clear signal that the market is facing short-term supply tightness and strong immediate demand. In the current MCX crude oil scenario, higher prices in near-month contracts reflect urgency in physical demand driven by global disruptions.

However, the lower pricing of far-month contracts suggests that the market expects supply conditions to improve over time, potentially easing prices ahead.

Read about the difference between Brent and WTI Crude here.

Disclaimer: ICICI Securities Ltd.( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470.  The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  Investments in securities market are subject to market risks, read all the related documents carefully before investing. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents are solely for informational and educational purpose.

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