Futures curve

A futures curve plots the prices of futures contracts on the same underlying asset, a commodity, index, or currency, across their different expiration months. Reading left to right by expiry gives a snapshot of what the market is pricing for that asset at each future date, distinct from its single current spot price.

The curve's shape is described as contango and backwardation: an upward-sloping curve, where later-dated contracts are more expensive, is contango, while a downward-sloping curve, where nearer contracts cost more, is backwardation. Shape is driven by storage costs, convenience yield, and supply and demand for immediate versus future delivery, and it differs from a bond yield curve in that it reflects a single asset's delivery terms rather than the price of money across maturities.

Traders and analysts use the futures curve to infer market expectations about supply tightness or surplus, to price calendar spreads between different expiry months, and as an input to strategies like the crack spread in energy markets. A frequent pitfall is treating the curve as a price forecast: it reflects current supply, demand, and cost-of-carry conditions, not a prediction of where spot prices will actually land.