Intermonth spread

An intermonth spread is the price difference between futures contracts of different delivery months for the same commodity. In energy markets, intermonth spreads are a key indicator of market structure, storage economics, and supply-demand balance.

When near-term prices are higher than later months, the market is in backwardation, often signalling tight supply or strong prompt demand. When later months trade at a premium, the market is in contango, typically reflecting oversupply and sufficient storage availability.

Energy traders actively trade intermonth spreads rather than outright prices to express views on inventory levels, refinery demand, or seasonal effects while reducing exposure to absolute price direction. Spreads are generally less volatile than flat prices but can move sharply during disruptions.

Example: a widening Brent front-month backwardation may indicate declining inventories or geopolitical risk. Storage operators monitor intermonth spreads to determine whether holding barrels is profitable after financing and storage costs. Intermonth spreads therefore sit at the heart of physical and financial energy market decisions.