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Trading Oil
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Contract expiry
FOREX.com's prices for BCO/USD and WTI/USD are derived from the price of Brent Crude and West Texas Intermediate futures trading on the Intercontinental Exchange (ICE).
Our prices are derived from the current (front month) price of the ICE contract up to the 2nd Wednesday of each month, Between that date and the expiry date of the ICE contract, the FOREX.com contracts will be priced from the next futures contract month to avoid expiry-related volatility.
Futures contracts have an expiry date, meaning that you can purchase a contract that expires in May, and/or a separate contract for June, July, etc. When trading these futures contracts, the trader has to decide whether to let the contract expire and take delivery of the oil, sell it before the expiry date, or "roll over" their trade to the next contract month.
Because the FOREX.com BCO/USD and WTI/USD contracts are based on the price of the futures contracts, they have an expiry date. At the close of trading on the date of expiry, all open positions and orders will be closed or cancelled.
To view FOREX.com's expiry dates, click here.
FOREX.com oil contracts expire on the 2nd Wednesday of every month, which is typically several days ahead of the ICE expiration date. This is done to avoid expiration-related volatility that often occurs in the futures contract price.
At 14:30 EST (19:00 UK time) on the date of expiration, all open BCO/USD and WTI/USD contracts with FOREX.com will be closed and cash settled at the closing contract rate. All Open Orders will also be closed. When FOREX.com re-opens oil trading,contracts will be priced against the current rate for the next futures expiry month. FOREX.com will reopen the market as soon as all expiry-related procedures are completed.
It is not possible to automatically roll over your BCO/USD or WTI/USD positions with FOREX.com - you will need to open a position in the new contract month when it becomes available for trading.
Contango and Backwardation
There is typically a difference in price between the closing price for the expiring month, and the opening price for the next month. This is caused by investors' expectations for the direction of future price movements,
A scenario where the more distant months are priced higher than the current month is called Contango. For example, if the May contract expires at $55, the June contract may open for trading at $56, $57, or higher in a 'contangoed' market
The opposite is true for a market in backwardation. A June contract expiry at $50 might see a July contract open at $47.
These scenarios mean that when a FOREX.com oil contract expires and trading reopens for the next month's contract, there can be a significant price difference. FOREX.com traders should be aware of this on the date of contract expiry.
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