Economics Stack Exchange Archive

What is the difference between oil futures contracts?

Take the information provided here:

http://205.254.135.24/dnav/pet/pet_pri_fut_s1_d.htm

Crude Oil (Light-Sweet, Cushing, Oklahoma)

Contract 1

Contract 2

Contract 3

Contract 4

What is the difference between the contracts?

Answer 1146

From the “Definitions, Sources & Notes” link on that page you’ve given: Contract 1 is “A futures contract specifying the earliest delivery date.” And contracts 2-4 “represent the successive delivery months following Contract 1”. - so they differ by delivery date, and the price differences between the contracts represent contango / backwardation (& possibly financing costs)

For crude oil, each contract expires on the third business day prior to the 25th calendar day of the month preceding the delivery month. If the 25th calendar day of the month is a non-business day, trading ceases on the third business day prior to the business day preceding the 25th calendar day. After a contract expires, Contract 1 for the remainder of that calendar month is the second following month.

So, the price for Contract 1, as of 4 April 1983, was for a contract that would expire on the 3rd business day prior to 25 April 1983.

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