The WTI futures curve continues to flatten. The M1-M2 spread narrowed to $0.45/bbl, the tightest backwardation since March. A month ago, the spread was $0.85/bbl. This indicates that near-term supply tightness is easing and the market is less confident about future deficits.
US gasoline demand is the primary concern. EIA data shows implied gasoline demand at 8.8 Mb/d for the week ending June 13, down 3% from the same period in 2025. Despite it being summer driving season, consumption has not picked up as expected.
Refinery utilization dipped to 92.1% from 92.6% the prior week, suggesting that Gulf Coast refiners are reducing runs amid weak margins. The gasoline crack spread fell to $18.50/bbl, down from $24/bbl in late May. Weak refining margins signal insufficient downstream demand.
If the flattening trend continues through July, the curve could approach contango, which would encourage storage builds. Floating storage economics — currently around $1.20/bbl for a 30-day VLCC — would become viable if the M1-M2 spread drops below $0.30/bbl.
Narrowing backwardation signals that prompt barrels are no longer at a premium. This favors floating storage and delayed lifting strategies. Buyers should consider deferred pricing if the curve flips to contango. If the M1-M2 spread falls below $0.30/bbl, storage plays become viable.