David Hay — Haymaker Daily: Backwardation: A Forward Oil-Price Clue? — a one-chart Daily that puts a near-term caution flag on Haymaker's own bullish energy book, opening with the bias disclosure that motivates it: "because we have a decidedly pro-energy outlook — particularly with oil, natural gas, uranium and, reluctantly, coal — we have to guard against only relaying data which backs up our bullish views on this long-disdained sector." The signal is the shape of the WTI futures curve: backwardation — the front month trading above the contract a year out — "in days gone by… was a rarity," but "for years now, it has been the prevailing condition." The information is in the degree, not the sign: "when it is very pronounced, the price of oil has consistently peaked." Two extremes are named and dated — the 2022 Russia-Ukraine invasion, when spot went "to over a $30 premium to the one-year out futures contract," and "back in March during the early days of the Iran War" — and "in both instances, the price soon did a cliff dive." The more useful evidence is the smaller peaks: "whenever the backwardation hit $10 the oil market corrected, at least to a degree." Today it "is right around $10, suggesting some kind of pull-back may be looming near-term." But the conclusion is a buy instruction, not a sell one — "our caution level is of a modest nature based on the exceptionally supportive fundamental set-up… don't be surprised if oil dips a bit but, if it does, prepare to be on the buy side." Hay adds that hedgers, not speculators, populate this curve ("industrial users of petroleum products, such as airlines, are heavy users of these instruments"). The single security named is XLE: "a further confirmation of the long-term uptrend is the extremely bullish nature of the breakout to an all-time high by the leading energy producer ETF, XLE, as we have previously noted. However, again to be fair, it is currently quite extended on a near-term basis, also indicating a correction might be close at hand." (Aug 19 2026)

A short, single-idea Daily whose whole purpose is to publish evidence against the house's own book — and it opens by saying so: "while Team Haymaker strives mightily to be as objective as possible, some degree of confirmation bias is inevitable when there are humans involved… because we have a decidedly pro-energy outlook — particularly with oil, natural gas, uranium and, reluctantly, coal — we have to guard against only relaying data which backs up our bullish views on this long-disdained sector." The evidence is the shape of the WTI futures curve. The first exhibit plots "the difference between the current price of oil and the futures contract for West Texas Intermediate (WTI) one year out" — the front month above the deferred, i.e. backwardation, which "in days gone by… was a rarity. That's why it is called backwardation; it's the inverse of the usual slope of the oil futures market. But for years now, it has been the prevailing condition." The signal is therefore not the sign but the degree: "the degree of backwardation has a valuable information signal hiding in plain sight: when it is very pronounced, the price of oil has consistently peaked." The two extremes are named and dated — 2022, when Russia's invasion of Ukraine and sanctions fears drove spot "to over a $30 premium to the one-year out futures contract," and "back in March during the early days of the Iran War" — and "in both instances, the price soon did a cliff dive." Two data points would be thin, which is why Hay points at the smaller peaks instead: "perhaps more interesting, and persuasive, are the less extreme backwardation peaks… whenever the backwardation hit $10 the oil market corrected, at least to a degree." And that is where the curve sits now: "presently, the backwardation is right around $10, suggesting some kind of pull-back may be looming near-term." The conclusion inverts what a bearish signal usually produces, because the fundamental case is unchanged: "our caution level is of a modest nature based on the exceptionally supportive fundamental set-up. In other words, don't be surprised if oil dips a bit but, if it does, prepare to be on the buy side." One credential is attached to the indicator itself — this curve is populated by hedgers, not just speculators: "industrial users of petroleum products, such as airlines, are heavy users of these instruments to hedge their costs so this is far from merely a plaything for hedge funds and other speculators." The single security named carries the same two-sided reading: "a further confirmation of the long-term uptrend is the extremely bullish nature of the breakout to an all-time high by the leading energy producer ETF, XLE, as we have previously noted. However, again to be fair, it is currently quite extended on a near-term basis, also indicating a correction might be close at hand."

One-line take: the cleanest example in this archive of a pundit hunting for his own disconfirming evidence — and it is worth reading for the method before the call. Hay states the bias out loud ("a decidedly pro-energy outlook… we have to guard against only relaying data which backs up our bullish views"), then goes looking for a series that would argue against the position rather than for it, and publishes it even though it says the opposite of what the book wants. The series is the WTI spot-versus-12-month spread. The important framing move is that backwardation itself has stopped being informative — it used to be "a rarity" and now "has been the prevailing condition" for years — so a signal that once lived in the sign has migrated to the magnitude. That is a generalisable insight: when a regime changes, the indicator does not necessarily stop working, but the threshold you read it at has to move with the regime, or you get a permanent, useless "sell" signal. The threshold Hay lands on is ~$10, calibrated not off the two famous extremes (2022 at over $30, March's Iran-War spike) but off the less dramatic peaks — "a bit harder to see, but whenever the backwardation hit $10 the oil market corrected, at least to a degree." Calibrating off the small cases rather than the crises is what makes it usable now, since the crises produce one observation a decade and the small peaks produce many. Two supports are quietly attached to the indicator's credibility: it is a physical curve, populated by hedgers (airlines, refiners) not just "a plaything for hedge funds," and it is genuinely differentiated — "frankly, we haven't come across analysis like this from any of our numerous energy research sources." What makes the note more than a timing call is what Hay does with the signal. A bearish indicator against a bullish book normally produces either a sale or an excuse; here it produces neither. The fundamental view is unchanged ("the exceptionally supportive fundamental set-up"), so the signal is downgraded to a preparation instruction rather than an action one: "don't be surprised if oil dips a bit but, if it does, prepare to be on the buy side." That is the same two-horizon construction the Aug-17 Update applied to DGX and IJH — near-term extension is a statement about entry timing and position size, not about the thesis. XLE is the only security named and it is deliberately double-edged: the breakout to an all-time high is cited as confirmation of the long-term uptrend, while the very same chart is "quite extended on a near-term basis." Rowed Positive — the structural stance on the energy complex is untouched and Hay is instructing readers to buy weakness, not to sell strength. Not present, deliberately: no price target, no portfolio table, no new pick, no rating change; oil/WTI itself is a commodity, not a security, so it gets no row.

1. Stocks & names mentioned

Ticker	Name	Research	View	What he said	At
XLE	Energy Select Sector SPDR ETF	QT · SA · STK	Positive	Structurally bullish, tactically extended — buy the dip, don't chase the breakout. The bullish half is stated as corroboration of the long-run case: "a further confirmation of the long-term uptrend is the extremely bullish nature of the breakout to an all-time high by the leading energy producer ETF, XLE, as we have previously noted." The honest half follows in the same breath: "however, again to be fair, it is currently quite extended on a near-term basis, also indicating a correction might be close at hand." That near-term caution is the same one the futures curve is flagging — WTI backwardation "right around $10," the level at which "the oil market corrected, at least to a degree" — and it is sized deliberately small: "our caution level is of a modest nature based on the exceptionally supportive fundamental set-up. In other words, don't be surprised if oil dips a bit but, if it does, prepare to be on the buy side." The house stance behind it is unchanged and stated up front: "a decidedly pro-energy outlook — particularly with oil, natural gas, uranium and, reluctantly, coal" in a "long-disdained sector." No price target, no rating change, no portfolio action attached — a timing flag on an existing long-term positive.	read ↗

"View" is Haymaker's stance in this Daily. XLE is the only security named in the entire post, and it is rowed Positive with a near-term caveat: the all-time-high breakout is offered as confirmation of the long-term uptrend while the same chart is conceded to be "quite extended on a near-term basis." Not rowed — deliberately: oil / WTI is the subject of the note but is a commodity and a futures curve, not a security, so no ticker is invented for it; natural gas, uranium and coal appear only inside the sector-preference sentence with no vehicle named; airlines are cited generically as hedgers of jet fuel, not as an investment; and Bloomberg is only the chart source. No portfolio tables, no new pick, no rating change and no price target were published with this issue. Research: QT Qualtrim · SA Seeking Alpha · STK Stock Analysis.

2. Talking points

The premise: publish the data that argues against your own book

The bias is declared before the evidence: "while Team Haymaker strives mightily to be as objective as possible, some degree of confirmation bias is inevitable when there are humans involved."
The specific exposure is named so the reader can discount accordingly: "we have a decidedly pro-energy outlook — particularly with oil, natural gas, uranium and, reluctantly, coal — we have to guard against only relaying data which backs up our bullish views on this long-disdained sector."
An aside that dates the note: "as we learn more about AI, we're not sure it isn't subject to some of its own blind spots."
The claim to differentiation is explicit — this is the reason the Daily exists: "frankly, we haven't come across analysis like this from any of our numerous energy research sources."

What the chart actually is

"The first shows the difference between the current price of oil and the futures contract for West Texas Intermediate (WTI) one year out."
Definition given in plain terms: "this structure, where the more distant contract sells at a discount to the so-called front, or spot, month… is called backwardation; it's the inverse of the usual slope of the oil futures market."
The second exhibit is the oil price itself, "which we've tried to sync with the first" — the whole method is reading one series against the other, which is why the alignment matters more than the aesthetics ("our apologies for the aesthetic mismatch; hopefully a small price to pay for a useful bit of data").

The regime change that moves the threshold

Backwardation used to be the exception: "in days gone by, this structure… was a rarity."
It is now the rule: "but for years now, it has been the prevailing condition." Hay flags the cause as unresolved and defers it — "why that persists is worthy of a future Daily."
The consequence is the analytical point of the note: because the sign is permanently on, the information has moved into the magnitude. "The degree of backwardation has a valuable information signal hiding in plain sight."

The signal: extreme backwardation marks oil-price tops

Stated flatly: "when it is very pronounced, the price of oil has consistently peaked."
Extreme #1 — "the two most extreme examples were in 2022 and earlier this year. The first was during Russia's invasion of Ukraine. That created pervasive fears of a severe oil shortage due to sanctions on Russian exports. As a result, the near-term price of crude went to over a $30 premium to the one-year out futures contract."
Extreme #2 — "back in March during the early days of the Iran War." Outcome for both: "in both instances, the price soon did a cliff dive."

Why the small peaks are the useful ones

Hay concedes the sample problem himself: "of course, that's only two examples."
The calibration comes from the ordinary cases instead: "perhaps more interesting, and persuasive, are the less extreme backwardation peaks. Those are a bit harder to see, but whenever the backwardation hit $10 the oil market corrected, at least to a degree."
Note the honesty in the size of the claim — "corrected, at least to a degree," not crashed. The threshold and the expected magnitude are matched to each other.

Why the curve isn't just speculators

"Realize that industrial users of petroleum products, such as airlines, are heavy users of these instruments to hedge their costs so this is far from merely a plaything for hedge funds and other speculators."
The point is what makes the indicator worth reading: a curve set partly by people who take physical delivery is closer to a scarcity reading than a positioning one — which is also why an extreme reading tends to mark the moment physical anxiety peaks.

Where the curve sits today — and what to do about it

"Presently, the backwardation is right around $10, suggesting some kind of pull-back may be looming near-term."
The caution is explicitly sized: "however, our caution level is of a modest nature based on the exceptionally supportive fundamental set-up."
And converted into a buy instruction rather than a sell one: "in other words, don't be surprised if oil dips a bit but, if it does, prepare to be on the buy side." A signal that contradicts the book changes the entry plan, not the thesis.

XLE — the same two-sided reading on the equity

Bullish: "a further confirmation of the long-term uptrend is the extremely bullish nature of the breakout to an all-time high by the leading energy producer ETF, XLE, as we have previously noted."
Cautious, in the same sentence: "however, again to be fair, it is currently quite extended on a near-term basis, also indicating a correction might be close at hand."
Two independent readings pointing the same way — the futures curve at ~$10 and the equity extended above a fresh all-time high — is what upgrades this from a chart observation to a stated near-term stance. The corollary Hay draws is the buy-the-dip one, not a trim.

Housekeeping

Two Bloomberg exhibits referenced in the original and omitted from the saved text: the spot-versus-12-month-out WTI spread synced against the oil price since 2016, and the XLE chart.
Signed "The Haymaker Team." No portfolio tables, no new positions, no rating changes, no price targets.
One open thread deliberately left for later: why persistent backwardation became the norm — "worthy of a future Daily."

3. In plain English

A jargon-free note on why each name matters here. (Companion to the table above; renders on each name's consolidated page.)

XLE — Energy Select Sector SPDR ETF Positive

XLE is a fund that owns the big American energy companies — the oil and gas producers and refiners in the S&P 500, with Exxon and Chevron the largest pieces. Buying it is the simplest way to own the sector rather than picking a single driller.

This note is not a new recommendation. Haymaker is already bullish on energy — "oil, natural gas, uranium and, reluctantly, coal" — and says so openly at the start, precisely because it is about to publish a piece of evidence that cuts the other way. Hay's worry is confirmation bias: if you only ever print the data that supports what you already own, you will be the last to know when it turns.

The evidence is in the oil futures market. Oil trades not just at today's price but at agreed prices for delivery months and years ahead. Normally the far-out price is a bit higher than today's, because someone has to pay to store the barrels. When it is lower instead — when buyers will pay more for a barrel today than for one a year from now — that is called backwardation, and it means the market is short of physical oil right now. It used to be unusual; for several years it has been the normal state of affairs, so simply noticing it tells you nothing any more.

What still tells you something is how big the gap is. Hay's charts show that whenever the premium for oil-today over oil-a-year-out has stretched to about $10 a barrel, oil has soon fallen back, at least somewhat. The two most extreme readings — over $30 during Russia's invasion of Ukraine in 2022, and again in March during the opening of the Iran war — were both followed by what he calls a "cliff dive" in the price. The gap is roughly $10 right now, which is why he expects a pull-back.

He also explains why this particular gauge is worth trusting: the people trading these contracts are not only speculators. Airlines and other big fuel users hedge their costs in exactly this market, so the price they are willing to pay for near-term barrels is a real-world reading on how tight supply feels, not just a bet.

Now the important part: none of this makes him a seller. The underlying supply-and-demand picture is, in his words, "exceptionally supportive," so the caution is deliberately "of a modest nature." The instruction is the opposite of what a bearish signal usually produces — "don't be surprised if oil dips a bit but, if it does, prepare to be on the buy side." A short-term signal changes when you buy, not whether you want to own the thing.

XLE fits the same shape. It has just broken out to an all-time high, which Hay reads as confirmation that the long-term uptrend in energy is intact — a fund making new highs after years of being ignored is a sign that money is finally arriving in the sector. But a chart that has run hard is also, by definition, stretched, and he says so: XLE is "quite extended on a near-term basis," so "a correction might be close at hand." Two separate things are pointing at the same short-term risk — the futures curve and the price chart — which is why he flags it rather than ignoring it. The stance stays Positive: buy the dip if you get one, don't chase the breakout.

Summary derived from the paid Haymaker Daily (text in transcript.txt) for personal study. Charts referenced in the original (Bloomberg) are omitted. Not investment advice. © Haymaker / David Hay for source material.