WTI crude oil fell from around $101 per barrel to roughly $96 overnight. At first glance, it looks like a $5 selloff in oil prices due to some fundamental reason, but in reality it was just something called futures rollover. The $5 gap is just the difference between two futures contracts rather than a sudden collapse in the value of crude oil.
When traders refer to the price of WTI, they are usually looking at a futures contract traded on the NYMEX. But WTI futures are available for multiple delivery months and they have an expiration. For example, there are separate contracts for October 2026, November 2026, December 2026 and so on. These contracts do not necessarily trade at the same price. The October WTI contract was trading around $101.3, while the November contract around $96.6.
Most retail platforms display a continuous WTI futures contract rather than forcing traders to manually switch between individual contracts. The continuous contract follows the most actively traded futures month. When liquidity migrates from one contract to the next, the platform can switch from one month to another. If your chart was previously displaying October WTI and then switches to November WTI, the chart can suddenly appear to move from $101 to $96. The chart simply changed which contract it was showing.
Why are different futures contracts priced differently?
The price of a futures contract reflects not only the current spot value of crude but also expectations and the economics of holding the commodity until that delivery month. One simplified way to think about the relationship is:
Futures price ≈ Spot price + financing/storage costs − convenience yield
For physical commodities such as oil, factors including inventories, storage availability, transportation costs, interest rates and expectations about future supply and demand can all influence the relationship between different delivery months. This produces what traders call the futures curve.
Contango and Backwardation
When later contracts trade below earlier contracts, the market is in backwardation. When later contracts trade above earlier contracts, the market is in contango. Contango often occurs when there is plenty of supply relative to immediate demand. Traders are effectively willing to pay more for future delivery. Backwardation often occurs when current physical supply is tight and buyers are willing to pay a premium to obtain the commodity now rather than later. Contango doesn’t necessarily mean the market expects prices to rise, and backwardation doesn’t necessarily mean the market expects prices to fall.
The difference between contracts can become especially large when the physical oil market is experiencing significant supply disruptions or uncertainty. WTI has been trading around the $100 level amid disruptions and geopolitical risks. In such an environment, the price of one delivery month can behave very differently from another.
The futures contract with the greatest liquidity will generally become increasingly important as traders roll their positions forward before expiration. Current contract data shows substantially greater open interest in November WTI than October WTI, which is an indication that trading activity has been migrating toward the November contract.
If one platform shows WTI at $96 while another major financial source reports WTI around $101, don’t immediately assume that one of them is wrong. They may simply be referring to different futures contracts.
This article was written by Giuseppe Dellamotta at investinglive.com.