• WTI crude oil has fallen to prices not seen since February 2022. 

• Yet the market's forward curve continues to show backwardation, or bullish supply and demand. 

• And the noncommercial side continues to hold a net-long futures position. 

How bearish is WTI crude oil? Much depends on your point of view. Before we get too deep into the discussion, a simple eyeball test shows the spot-month contract (CLM25) hit a low of $55.12 in late April before sliding to $55.30 Sunday night through early Monday morning (May 5, 2025). The April mark was the lowest price by the spot-month contract since February 2020. If we apply what we learned in Econ 101, the Law of Supply and Demand: Market Price (spot price in crude oil) is the point where the quantity demanded equals quantities available creating a market equilibrium.Therefore, the lower the price, the more supplies are available in relation to demand. 

But what about our other fundamental reads, most notably futures spreads? WTI crude oil’s forward curve has been in backwardation (inverted) for as long as I can remember, with the spot-futures spread’s weekly close-only chart showing backwardation since settling at par ($0) the week of December 7, 2020. Theoretically, and I could add historically, when dealing with storable commodities, backwardated futures spreads individually and a market’s forward curve collectively indicates a bullish supply and demand situation. Therefore, based on my Market Rule #6 (Fundamentals win in the end), crude oil should be trending up. Not this time though, with the long-term downtrend in the futures market starting with the bearish spike reversal completed at the end of June 2022, from a technical point of view. 

If WTI crude oil’s fundamental reads are unclear, what about fund activity? After all, based on my Market Rule #1, we don’t want to get crossways with the trend because price direction over time (simple definition of trend) is set by fund (noncommercial) activity. Given this, we would expect to see a sizeable net-short futures position has been built over the last few years, right? Logically yes, but markets don’t have to be logical. I look at the chart built using CFTC Commitments of Traders report (legacy, futures only) numbers we see the noncommercial side has held a steady net-long futures position (blue line on chart) between roughly 150,000 contracts and 350,000 contracts since late June 2023. 

Structurally^[i], then, WTI crude oil doesn’t make much sense, making my Market Rule #2 (Let the market dictate your actions) null and void, at least for now. What about Rule #3 (Use market filters to manage risk)? Here I’m talking about seasonality and price distribution, with a little market volatility thrown in for good measure.

• WTI crude oil remains in a contra-seasonal downtrend. When this is seen it shows us real fundamentals are more bearish than normal for a particular time of year. Yet as mentioned above, the spot futures spread continues to show backwardation meaning fundamentals could be viewed as bullish.
• The spot-month contract priced at $55.30 put it in the lower 40% of its price distribution range based on weekly closes-only back through January 2015. This is generally a neutral position, with the lower 33% starting at $52.25. We have to keep in mind WTI price distribution studies were likely skewed by the spot-month contracts move below $0 back in April 2020.
• Implied volatility remains high, coming in at roughly 45% Monday morning. 

Did our usual filters clear things up? Not at all. If anything, they made things murkier. What do we do when it comes to analyzing and trading WTI? Apply Rule #5: It’s the what not the why. We know the “What”: The market is trending down. Why? Well, much of the industry spends its time making up different reasons, but most of it is nonsense. In the end it goes back to the beginning: 

• Don’t get crossways with the trend, and the long-term trend is down with price distribution showing room to extend.
• The continued slide of the spot-month contracts tells us, regardless of what we think we see, changes in supply are outpacing demand. 

^[i] Nearly all commodity markets have a structure made up of two sides: Commercial and Noncommercial. Based on how these two sides align with each other creates one of 9 types of market ranging from the most bullish Type 9 (both sides are bullish) to most bearish Type 1 (both sides are bearish).