Commodity Futures: How Crude Oil and Gold Contracts Work

Before you read: Equity Index Futures: E-mini and Micro Contracts Compared

What you will learn

• How commodity futures differ from index futures: physical units, physical delivery and monthly listings.
• How the main crude oil and gold contracts, and their micro versions, are sized.
• What contango and backwardation mean, and why the roll matters more for commodities.

What makes a commodity contract different?

If an index future settles in cash, what happens when the underlying is a barrel of oil?

A commodity future is an agreement about a physical good: a quantity, a quality grade and a delivery location. Its contract unit is a physical amount rather than a dollar multiplier, and its price is quoted per unit, such as dollars per barrel or dollars per troy ounce. Many commodity contracts are physically delivered. If a position is still open after the last trading day, the long side can be required to take delivery and the short side to deliver. Many retail brokers do not allow customers to go into delivery and close or roll positions before the delivery period begins, sometimes days before the exchange deadline.

How are the main contracts sized?

Why does a one-cent move in oil matter more than it sounds?

A one-dollar move in crude oil is 100 ticks, or $1,000 per CL contract. A ten-dollar move in gold is 100 ticks, or $1,000 per GC contract. The same tick-value formula from contract specifications applies: tick size times the contract unit.

Why do commodity months behave differently?

Why might next month’s oil cost more, or less, than this month’s?

Commodities cost money to store, insure and finance, and their supply and demand can change by season. So contracts for different months can trade at noticeably different prices. The list of prices across months is called the forward curve.

• Contango means later months are priced higher than nearer months, which is common when supply is ample and storage costs show up in the price.
• Backwardation means later months are priced lower, which tends to appear when nearby supply is tight and the market pays more for the good now.

For gold, which is plentiful in storage and cheap to hold relative to its value, the curve usually reflects mostly interest costs. For crude oil, the curve can change shape quickly with inventories and events. Rolling a position from one month to the next means closing at one price on the curve and opening at another, so on continuous charts commodity roll gaps can be large. This is a description of how curves look, not a signal.

Commodity contract diagram

Illustrative diagram constructed for teaching. Not real market data.

The diagram shows two fictional forward curves across six contract months: one rising (contango) and one falling (backwardation). It is constructed for teaching and is not real market data.

What drives these markets?

What kind of news matters for a barrel of oil compared with an ounce of gold?

Crude oil prices respond to production decisions, inventory reports, refinery demand, transport disruptions, the economy and the US dollar. Weekly government inventory data is a scheduled event many energy traders watch. Gold is often discussed in relation to interest rates, the US dollar, inflation expectations and demand for safe-haven assets, as well as central bank and jewelry demand. These are factors traders talk about, not reliable cause-and-effect rules. Correlations between them change over time.

What this does not tell you about commodity futures

• Delivery rules, last trading days and broker cutoffs are specific to each contract and broker. Check them before holding any position near expiration.
• Contract units, ticks and settlement terms are set by the exchange and can change.
• The shape of the forward curve does not predict where prices go.
• Commodity markets can gap on news and on inventory reports. Limits and stops do not guarantee an exit price.

Check yourself

1. Crude oil moves from $70.00 to $70.35. How many ticks is that, and what is it worth for one CL and for one MCL contract? Hint: $0.01 per tick.
2. What does it mean if the next month trades above the front month? Hint: contango or backwardation?
3. Why do many brokers ask clients to exit physically delivered contracts before the exchange’s last trading day? Hint: what happens to an open long position at delivery?

Trademark note. CME Group is a trademark of Chicago Mercantile Exchange Inc. NYMEX is a trademark of New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. Socratic Trading Academy is not affiliated with, sponsored by or endorsed by CME Group.

Last reviewed November 9, 2026. Spotted a mistake? Report an error.