How to build a futures forward curve chart
Quick answer
A futures forward curve plots contract prices at different delivery dates. When near-month contracts are cheaper than far-month (upward slope), the market is in contango — indicating oversupply and storage costs. When near-month is more expensive (downward slope), it's backwardation — indicating tight supply. The curve's shape reveals supply/demand dynamics and informs roll yield for investors.
What is a futures forward curve?
A futures forward curve plots the prices of futures contracts at different delivery dates for the same underlying commodity or financial instrument. It's one of the fundamental tools in commodity markets, fixed income, and any market where futures trade.
The shape of the forward curve reveals critical information about supply and demand dynamics, storage costs, convenience yields, and market expectations for future prices.
What is the difference between contango and backwardation?
When near-month contracts are cheaper than far-month contracts (upward-sloping curve), the market is in contango. This is the 'normal' state for many commodities: you pay a premium for future delivery because of storage costs, insurance, and financing.
When near-month contracts are more expensive than far-month (downward-sloping curve), the market is in backwardation. This indicates tight near-term supply: the market is willing to pay a premium for immediate delivery.
The degree of contango or backwardation — the steepness of the curve — is itself a signal. Steep contango in oil suggests oversupply and high storage costs (as seen in 2020 when oil storage tanks were full). Steep backwardation suggests supply anxiety (as seen during geopolitical disruptions).
What is roll yield and how does the forward curve affect it?
For investors holding futures positions, the shape of the forward curve determines 'roll yield' — the gain or loss from rolling expiring contracts into the next month. In contango, you sell cheap (near month) and buy expensive (far month), generating negative roll yield. In backwardation, the opposite: positive roll yield.
This is why many commodity ETFs underperform the spot price — they're continuously paying the contango roll cost. Understanding the forward curve is essential for anyone investing in commodities.
How do I build a futures forward curve chart?
Connect to any futures data source with contract month and settlement price columns. Quadesto plots the forward curve with:
• Current curve as the primary line
• Historical curves (1 week ago, 1 month ago, 3 months ago) as overlays
• Contango/backwardation labeled and color-coded
• Roll yield calculation between adjacent months
The historical overlay is particularly valuable — it shows how the curve's shape has evolved, revealing changes in market expectations.