A forward curve displays the relationship between futures prices and their delivery dates, showing market expectations for future price levels across different time horizons. The curve’s shape provides insights into supply-demand expectations, storage costs, convenience yields, and market sentiment. Forward curves can be upward sloping (contango), downward sloping (backwardation), or mixed depending on market conditions.

Forward curve analysis helps traders understand market structure, identify arbitrage opportunities, and assess relative value between different contract months. Changes in forward curve shape often signal shifting market fundamentals or supply-demand expectations. Curve steepening or flattening can create profitable trading strategies for sophisticated market participants.

Real-world example: The crude oil forward curve shows $75 for prompt delivery, $78 for six-month delivery, and $80 for one-year delivery, indicating market expectations of gradually rising prices and normal storage costs.