Forward Curves

A forward curve is a specialized chart used to visualize the future expectation of the price for a commodity. The plot is a calculation showing the current price against the contract's expiration date. The forward curve will plot each each expiration for the commodity and its' corresponding last price.

Open

To insert a Forward Curve chart, click on the dropdown menu located below the ‘Chart’ icon and select ‘Forward Curves'

Open

Once selected, you will see a dialogue where you can search for one or multiple futures contracts. Key in a futures root, name of a contract or keyword to populate a list of suggestions.

Select one or multiple contracts from the list by double clicking on the instrument or drag and dropping them into the insert pane of the dialogue.

Once the symbol(s) have been selected, you can now opt to view the curve as of the current date, view the curve on a prior date or compare the current curve to previous dates. Use the dropdown menu labeled ‘Exact Date’ to select predetermined dates like 1-day, 1-week, 1-month and 1-year.

Click the ‘Apply’ button to insert any or all of these ‘lookback’ dates and then insert the Forward Curves(s) into your workbook.

Below are the current, 1-day, 1-week, 1-month, and 1-year prior curves versus the current curve for CBOT Soybean Meal (ZM) and Soybean Oil (ZL).

Historical curves can also be applied for specific dates by clicking in the date picker. Below, the current COMEX Gold (GC) Forward Curve is compared against the curve as of November 15, 2023 (56 days ago).

Once inserted, you can click on back on the Chart icon to edit the Forward Curves.

Futures Forecasting

Viewing Forward Curves enables traders and investors alike to spot both contango and backwardation. When the nearest expiry or ‘spot’ price is trading at a discount to the deferred expirations, this commodity is then said to be in contango. The Forward Curve for CBOT SRW Wheat (ZW) below is exhibiting contango where the deferred months are priced at a premium to the spot.

Insurance, cost of carry, storage, and interest rates can all play a deciding factor for when a commodity exhibits this behavior. Conversely, commodities in backwardation (inverted) have their spot price trading at a premium to the deferred months. Below is the Forward Curve for ICE-EU listed Brent Crude Oil (CB).

This type of market can present itself during periods of geopolitical uncertainty when owning a commodity now, as opposed to later, is in favor. Supply chain concerns and warehouse storage depletion can also cause such a curve. As tensions diminish, interest rates change and supplies replenish, curves can reverse course as market participants reevaluate their expected outlook on the relationship between spot prices and deferred delivery periods.