[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"doc-seo-325137-105":3,"detail-sidebar-cat-0-en-105":81,"doc-detail-325137-en":131},{"code":4,"msg":5,"data":6},0,"ok",{"site_id":7,"language":8,"slug":9,"title":10,"keywords":11,"description":12,"schema_data":13,"social_meta":74,"head_meta":76,"extra_data":78,"updated_unix":80},105,"en","crude-oil-futures-oil-prices-backward-to-the-future","Crude Oil Futures - Oil Prices: Backward to the Future?","","Oil futures prices are often used by observers as a quick indicator of where crude oil prices may go, but futures do not reliably forecast future spot prices. This Economic Commentary explains how the crude oil futures market works, including how spot and futures prices are set by economic forces. It also describes key contract mechanics such as hedging, daily marking to market, margin requirements, and why oil’s special characteristics limit what futures prices reveal.",{"@graph":14,"@context":73},[15,34,56],{"@type":16,"itemListElement":17},"BreadcrumbList",[18,23,27,31],{"item":19,"name":20,"@type":21,"position":22},"https://docshare.wps.com","Home","ListItem",1,{"item":24,"name":25,"@type":21,"position":26},"https://docshare.wps.com/document/","Document",2,{"item":28,"name":29,"@type":21,"position":30},"https://docshare.wps.com/document/research-report/","Research & Report",3,{"item":32,"name":10,"@type":21,"position":33},"https://docshare.wps.com/document/crude-oil-futures-oil-prices-backward-to-the-future/325137/",4,{"url":32,"name":10,"@type":35,"image":36,"author":41,"headline":10,"publisher":44,"fileFormat":47,"inLanguage":8,"description":12,"dateModified":48,"datePublished":49,"encodingFormat":47,"isAccessibleForFree":50,"interactionStatistic":51},"DigitalDocument",{"url":37,"@type":38,"width":39,"height":40},"https://docshare.wps.com/thumbnails/crude-oil-futures-oil-prices-backward-to-the-future/325137.png","ImageObject",300,407,{"name":42,"@type":43},"Lucas Martin","Person",{"url":19,"name":45,"@type":46},"DocShare","Organization","application/pdf","2026-10-26","2026-09-21",true,{"@type":52,"interactionType":53,"userInteractionCount":55},"InteractionCounter",{"@type":54},"ViewAction",11,{"@type":57,"mainEntity":58},"FAQPage",[59,65,69],{"name":60,"@type":61,"acceptedAnswer":62},"Why do oil futures prices not predict future oil prices well?","Question",{"text":63,"@type":64},"Futures prices can reflect market forces affecting trading, but they do not provide clear information about where spot prices will head because oil has distinctive characteristics and value tied to remaining in the ground.","Answer",{"name":66,"@type":61,"acceptedAnswer":67},"How does an oil futures contract reduce price risk for buyers and sellers?",{"text":68,"@type":64},"A buyer and seller agree today to a specified price and quantity for delivery on a future date. The contract reduces uncertainty and price risk by locking in terms, though it shifts risk toward potential default if the spot price differs at expiration.",{"name":70,"@type":61,"acceptedAnswer":71},"What does “marked to market” mean in oil futures trading?",{"text":72,"@type":64},"Futures contracts are revalued daily using the closing futures price. Gains are credited and losses are debited to each party’s margin account, and participants must maintain the required margin balance.","https://schema.org",{"og:url":32,"og:type":75,"og:title":10,"og:site_name":45,"og:description":12},"article",{"robots":77,"canonical":32},"index,follow",{"doc_id":79,"site_id":7},325137,1790472656,{"code":4,"msg":82,"data":83},"success",[84,88,92,96,101,106,111,115,120,123,127],{"id":22,"doc_module":4,"doc_module_name":25,"category_name":85,"show_sort_weight":86,"slug":87},"Story & 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prices might be,the fog sur-rounding their future path only makesthings worse.People wonder,can theygo higher?Will they fall?To gain someclarity,many observers have looked tooil futures prices as a quick and easymeans to forecast the direction of oilprices.After all,that is the market whereexperts trade contracts for the futuredelivery of oilUnfortunately,futuresprices do not predict well.A close exam-ination of the futures market may helpus understand the forces affecting oilprices,but won't tell us much aboutwhere those prices are headed.  \nThis Economic Commentary explainsthe basic workings of the oil futuresmarket and the economic forces that setthe spot and futures prices of oil.  \n# ■ Crude Oil Futures\n\nUntil the late 1970s,oil prices wereprimarily determined by long-term con-tracts between oil producers and intema-tional oil companies.OPEC produced67 percent of the free world's crude oil,allowing it to dominate the price andquantity of oil sold.Prices fluctuatedwhen these long-term contracts wererevised,but prices were not otherwiseparticularly responsive to market condi-tions.Spot markets—markets for imme-diate delivery—were relatively unimpor-tant,and accounted for only 10 percentof internationally traded crude oil.  \nHowever,the oil market began to changeas non-OPEC countries surpassedOPEC oil production for the first time in1982.Owners of the newer oil,fromareas such as the North Sea,lacked thetypical long-term contracts with buyers,forcing them to find other ways to buildmarket share.They were able to achieve  \n# Oil Prices:Backward to the Future?\n\nthis objective on the spot markets byundercutting OPEC.Buyers wereattracted by prices that could range asmuch as S8 per barrel below long-termcontract prices.The strategy worked,and a fundamental change took place inthe oil marketBy the end of 1982,almost halfof all internationally tradedoil was traded on the spot market insteadof through long-term contracts.Even theworld's largest oil companies beganturning from long-term contracts,replac-ing them with market-determined priceagreementsWith prices now determinedon a very-short-term basis,daily fluctua-tions in the price of oil became the norm.In order to hedge against daily fluctua-tions in the oil market,participantsbegan purchasing oil futures.  \nWith an oil future,a buyer agrees to pur-chase oil at a prespecified price and quan-tity on a certain date in the future,theexpiration date.The agreement is madetoday,but the oil and the payment aredelivered in the future.This contract elim-inates the uncertainty and price risk forboth the buyer and seller.This insurancecomes at a cost,however.If the actualspot price on the expiration date differsfrom the futures price.one party wllregret signing the contract.This party hasan incentive to default on the agreement,because he either purchased oil for higherthan the prevailing market price,or soldoil for lower than the spot price.In orderto reduce the credit risk,futures contractsare marked to market daily using the clos-ing futures price.This means that when-ever the closing futures price goes up ordown,the gain is credited to—or the lossis debited from—the appropriate party'smargin accountParticipants must main-tain a specified amount of funds (themargin requirement)in this account.  \nA useful first guess about the futurespot price of a commodity is usuallyfound in its current futures price.Butit doesn't work that way when thecommodity in question is oil.ThisCommentary explains why the char-acteristics of oil,particularly thevalue it can offer its owner byremaining in the ground,cloud theinformation that oi futures pricesgive about future oil prices.  \nBy marking to market daily and makingsure participants maintain marginrequirements,credit risk is lower than itwould be if gains and losses were notsetled until the expiration date.For somecommodities,the credit risk is furtherlower","cbCairVlwej2VD2m","https://ap.wps.com/l/cbCairVlwej2VD2m","pdf",1203368,"English","# Crude Oil Futures\n## Will Oil Prices Fall?","[{\"question\":\"Why do oil futures prices not predict future oil prices well?\",\"answer\":\"Futures prices can reflect market forces affecting trading, but they do not provide clear information about where spot prices will head because oil has distinctive characteristics and value tied to remaining in the ground.\"},{\"question\":\"How does an oil futures contract reduce price risk for buyers and sellers?\",\"answer\":\"A buyer and seller agree today to a specified price and quantity for delivery on a future date. The contract reduces uncertainty and price risk by locking in terms, though it shifts risk toward potential default if the spot price differs at expiration.\"},{\"question\":\"What does “marked to market” mean in oil futures trading?\",\"answer\":\"Futures contracts are revalued daily using the closing futures price. Gains are credited and losses are debited to each party’s margin account, and participants must maintain the required margin balance.\"}]","Crude Oil Futures - Oil Prices: Backward to the Future? | PDF",1789969779,13]