traders like charts that point up and to the right they signal optimism and big returns right now the oil futures curve is pointed sharply in the other direction it looks like a bearish sign for the market because it implies that traders expect oil prices to fall but the shape of the curve is not necessarily a sell sign for oil stocks in fact there’s ample reason to believe that producers have major opportunities ahead when oil futures trade at lower levels than spot prices and nearterm futures that’s known as backwardation right now brent crude the international benchmark oil price is trading at its most severe backwardation since futures prices have been tracked ubs strategists wrote on thursday in fact they call it “super backwardation” “for as long as the brent futures contract has been available there hasnever been such an extreme premium of the front contract over longerdated contracts” strategist giovanni staunovo wrote as of friday frontmonth brent futures expiring in april were trading at 9855 a barrel futures expiring in october were trading at 8741 a barrel the spdr sp oil  gas exploration  production exchangetraded fund ticker xop was down 03 on friday but is up 9 this year there are both longterm and shortterm dynamics playing into the shape of the curve today the longerterm issue is that oil supplies have dwindled as economies have bounced back from covid19 and supply growth has not kept up there’s a lot of competition for barrels of oil coming to market today because refiners want to cash in on rising demand the shorterterm issue is russia’s invasion of ukraine uncertainty about sanctions and whether russia will withhold oil exports from europe has frightened traders and added a premium to prices in addition refineries are competing to secure alternatives to russian crude out of fear of sanctions causing brent prices to soar in the nearterm longerdated futures are trading much lower because traders don’t expect these panicked dynamics to last—either the russian invasion will end or the market will find a way around the issue that in itself is good news a panicked market isn’t a safe place to invest most investors would rather that prices stay relatively high and steady rather than swing to extreme levels if longdated oil futures were trading at levels that made it hard for oil companies to make money producing oil that would clearly be bearish producers would have no incentive to keep pumping but the market is signaling that oil is worth over 85 six months from now—a level where basically all producers can sustain doubledigit free cash flow yields and offer investors hefty dividends meanwhile most are trading at a discount to their historical averages—likely because investors remain hesitant to buy energy stocks either because of climate concerns or because historically the companies have not managed their balance sheets well but some investors are in buying mode now “it is certainly an environment where we’re looking for opportunities particularly looking at exploration and production companies” mike morey chief investment officer at integrity viking funds said in an interview “the multiples that they’re trading at are well below their historical average in a 100 crude oil environment they should be trading at near historic highs”