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- WTI December 2025 December 2026 Spread
October 27,2025
Overview
The crude oil forward curve moved dramatically late last week after the U.S. issued sanctions on key Russian oil firms.
Just one week ago, we wrote that we thought that the spread had bottomed at $-1.67; we had suggested one week that the spread could retest the $-0.41 level that we had cited 2 weeks ago, but in no way could we have seen the return to a strong backwardation for the spread as was seen in the explosive rally that ensued Thursday/Friday.
Now the spread is suggesting to us that it has seen an interim top at the high of $2.58 from Friday. The spread had a mean reversion set up from Thursday's close of $2.03, which was confirmed with Friday's settlement of $1.65, putting the price back below the upper bollinger band. We even see some possible resistance at $2.23, thus below the Friday high. The first support seen is at $1.14 and then at $0.55/$0.56. Given the uncertainty surrounding Russian oil flows for the foreseeable future, we would expect the December 2025 December 2026 spread to remain in backwardation. Momentum for the spread is positive currently.
The news items and stories we have seen the past 2-3 days are giving some credence to our notion of an interim top currently for the spread.
OPEC+ has signaled today its likely intention to bring back some more production, upon which they will decide at their upcoming meeting next weekend,, even though that amount is likely to be small.
Some uncertainty exists as to how much the proposed sanctions by the U.S. on Russian oil will actually come to pass. Central to the mammoth trade between Russia and China is the long-term contract between Rosneft and state-owned China National Petroleum Corp., which involves purchases of ESPO crude via pipelines to landlocked refineries in the northern Daqing region. It’s unclear, however, if these pipeline flows — about 800 MBPD — will be affected by the sanctions due to the government-to-government nature of the project.
Oil Price commentary, regarding the Russia sanctions, suggests that "over the longer term, oil will find a way as it always does." Kpler analysis says that "a complete halt of Russian oil purchases was unlikely." China and India have already been testing local currency payments for Russian oil. Chances are that this testing would accelerate thanks to the latest sanctions, which affect dollar denominated transactions.
One veteran Russian oil analyst says :" the result (of the sanctions will) be longer transit times, reluctant banks, and higher freight and insurance costs. “Eventually new ‘shadow’ channels will emerge,” she said, “but the adjustment will take longer and discounts will deepen.”
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This article and its contents are provided for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any commodity, futures contract, option contract, or other transaction. Although any statements of fact have been obtained from and are based on sources that the Firm believes to be reliable, we do not guarantee their accuracy, and any such information may be incomplete or condensed.
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