AndyP
Level 2 Member
It would partially depend on what month the futures contract is expiring in. It's not like a stock that is valued based on the future earning stream.Doesn't the current price take into account the likelihood that supply will decline in a few years?
But if you hold a January 2018 futures contract, that would definitely be based on future fundamentals.
However, a futures contract for this February is based on more immediate supply and demand. However, it's not entirely immediate because many buyers (investment companies) will buy current contracts and take possession of the physical oil and store it. This inventory they hold and (hopefully) sell at a higher price in the future. So if the current price gets much lower than future fundamentals support, this becomes a strong proposition, investors step in and buy short-term futures, and hold the physical oil as inventory, thus increasing the price.