What's the difference in the price of a barrel of oil delivered to your doorstep today vs. a contract that locks in a price and guarantees you a barrel of oil in 6 months? You'd need to think about what it costs to store a barrel of oil. First, you'll need a warehouse and safety gear to keep it (the fumes of a single barrel of oil can quickly kill you). Then there are insurance, financing, and other hidden costs to owning the physical commodity.
Backwardation and Contango
Backwardation and Contango
Backwardation and Contango
What's the difference in the price of a barrel of oil delivered to your doorstep today vs. a contract that locks in a price and guarantees you a barrel of oil in 6 months? You'd need to think about what it costs to store a barrel of oil. First, you'll need a warehouse and safety gear to keep it (the fumes of a single barrel of oil can quickly kill you). Then there are insurance, financing, and other hidden costs to owning the physical commodity.