Futures vs CFDsBoth give you leveraged exposure in either direction. One is a standardised contract on a public exchange; the other is a private agreement with your broker. Almost every practical difference falls out of that.Commodity trading explained
Oil inventories fell, which is bullish, and the price dropped anyway. Commodities trade on the gap between what happened and what was expected - and on a curve most retail traders never look at.
A commodity is a physical good traded to a recognised specification: crude oil, natural gas, copper, wheat, coffee, sugar. Not a share in a company, not a claim on a government - a thing, which somebody eventually has to produce, ship and store.
That physicality is the whole difference. A currency does not rot, take up warehouse space or need insuring. Wheat does. Every one of those costs ends up inside the price, and the mechanism it ends up through is the futures curve.
Why supply reacts so slowly, and why that matters
Copper demand rises. The obvious response is to produce more copper. But a new mine takes years to permit, finance and build, so for a long stretch the supply simply cannot answer.
Demand is often just as stiff in the short run. Fuel prices double and vehicles still need fuel; heating costs spike and buildings still need heating. Neither side can adjust quickly, so the price does the adjusting instead. That is why commodity markets produce moves that would be extraordinary in currency markets and are unremarkable here.
The futures curve
A commodity does not have one price. It has a price for delivery in January, another for February, another for March, and so on out for months or years. Plot them and you get the futures curve.
When later months cost more than nearer ones, the market is in contango. When nearer months cost more, it is in backwardation. These are not forecasts. A curve sloping upward does not mean traders expect the price to rise - it usually means somebody has to pay for storage, insurance and financing to hold the physical goods until then, and that cost is priced in.
Contango and backwardation
The shape tells you about conditions now, not about direction later. Both examples below use crude oil.
| Curve shape | What it usually reflects |
|---|---|
| Contango: Jan $70, Feb $71, Mar $72, Apr $73 | The cost of carrying the commodity forward: storage, insurance, financing. Common in well-supplied markets. |
| Backwardation: Jan $80, Jun $75 | Immediate supply is scarce and buyers will pay a premium to have it now rather than later. |
| Steep contango | Often signals abundant supply and full storage. |
| Deep backwardation | Often signals a supply disruption or unusually strong immediate demand. |
Neither shape predicts the spot price. Both describe what it currently costs to hold the physical commodity through time.
A futures price is not a forecast. It is a spot price plus the cost of waiting.
Roll yield, and how a rising commodity produces a falling return
Anyone holding commodity exposure for longer than one contract lasts has to roll it: sell the expiring month, buy a later one. In contango that is structurally expensive, and it repeats.
Rolling a long oil position through a contango curve
- Sell the expiring contract at$70
- Buy the next contract at$73
- Cost of the roll$73 − $70−$3 per barrel
- Repeat monthly for a year12 × −$3−$36 of drag
The trapSpot rises, position losesThe barrel got more expensive and the position still went backwards, because every roll bought high and sold low. In backwardation the same mechanism works in your favour. This is roll yield, and it is the reason commodity ETF performance so often diverges from the headline price.
Oil is not one thing
Traders talk about "the oil price" as though there were one. There are dozens of crude grades, and two benchmarks dominate the quotes: Brent, the international reference, and WTI, the US one.
They differ in density, sulphur content and, critically, in where they are delivered. Those differences mean the two can and do trade at meaningfully different prices, and a spread between them can widen or collapse on entirely regional news - a pipeline outage, a change in US export capacity, a shipping disruption.
So the first question on any oil position is not which direction. It is which contract.
Commodities across our broker records
Almost every broker offers commodities. Very few offer the exchange-traded futures underneath them, which is why understanding the CFD wrapper matters here more than in most markets.
- 95of 100 brokers offer commoditiesThe most widely offered non-forex market in our records.
- 60list metals explicitlyThe rest fold gold and silver into a broader commodities heading.
- 27offer futuresBarely a quarter. Most retail commodity exposure is a CFD referencing a futures contract, not the contract itself.
That gap between 95 and 27 is the whole reason [futures vs CFDs](/insights/markets/futures-vs-cfds/) exists as a separate guide.
Rollover on a continuous CFD
Brokers offering a continuous, non-expiring commodity CFD have to move their reference from one futures contract to the next when the old one expires. If the old contract was $70 and the new one is $73, the chart appears to jump three dollars overnight.
A properly built rollover applies a compensating adjustment so that mechanical jump is not handed to you as profit or taken as loss. What it cannot remove is the underlying economics: over months, the curve still costs you or pays you. The adjustment tidies the chart, not the carry.
Before trading a commodity
The first three questions are about the market. The last three are about the contract, which is where the surprises live.
- Is this energy, a metal, an agricultural product? They have almost nothing in common.
- What are inventories doing, and what was the market already expecting?
- Is the curve in contango or backwardation, and am I holding long enough for that to matter?
- What does one lot represent in this specific instrument?
- Does this CFD expire, or is it continuous with rollover adjustments?
- Is there a scheduled inventory report, producer meeting or crop report before I intend to close?
Common questions
What is a commodity?
A basic physical good traded to a recognised grade or specification: crude oil, copper, wheat, coffee, gold.
What is the difference between hard and soft commodities?
Hard commodities are extracted or mined: oil, gas, metals. Soft commodities are grown: coffee, sugar, cocoa, cotton.
What is contango?
When later-dated futures trade above nearer-dated ones. It commonly reflects storage, insurance and financing costs rather than a bullish forecast.
What is backwardation?
When nearer-dated futures trade above later-dated ones, typically because immediate supply is scarce and buyers will pay to have it now.
Does contango mean prices will rise?
No. It reflects the cost of carrying the commodity through time. Treating the curve as a forecast is one of the most common commodity mistakes.
What is roll yield?
The gain or loss from moving exposure between futures contracts. Persistent contango creates a drag; backwardation can create a benefit.
Do I own oil when I trade an oil CFD?
No. A CFD is cash settled. No barrels are involved, and none will ever arrive.
Are Brent and WTI the same price?
No. They are different crude benchmarks with different specifications and delivery systems, and the spread between them moves.
Why does weather move commodity prices?
It changes crop yields, heating and cooling demand, and transport. Because markets price expectations, a forecast can move prices well before any physical effect appears.
Do OPEC production cuts guarantee a higher oil price?
No. What matters is whether the cut was larger or smaller than expected, whether members comply, and what demand is doing at the same time.
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Nothing here is financial advice. Leveraged products can lose more than they make.
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