Oil Trading in Backwardation: Record Crack Spreads and Hormuz Risk

Oil trading in mid-August 2026 is highly sensitive to geopolitical risk and fundamental data, with West Texas Intermediate (WTI) prices stalled near $84.30 as it attempts to push higher toward $85-86.

The market has returned to backwardation, where front-month WTI and Brent prices sit above contracts further out the curve, rewarding traders who are long the front month and roll their positions forward.

Record crack spreads have exploded to historic highs, with diesel cracks trading above $100 per barrel, indicating that refined-product markets are tighter than the crude market.

The Strait of Hormuz supply disruption remains a dominant risk, with shipping volumes well below pre-crisis levels and confidence in safe passage low.