What Is Contango? Futures, Funds and CFDs on Commodities

A future is an agreement to buy or sell a set amount of something on a set date, at a price fixed today. Every future has an expiry. A market lists several at once, for example oil for next month, the month after and so on. The row of prices across those dates is called the futures curve. The exact contract terms of each of our 15 commodities are on their pages, starting with WTI crude oil and natural gas.

• Contango: later contracts cost more than earlier ones. The curve slopes up. It often reflects the cost of storing and financing the commodity until the later date.
• Backwardation: later contracts cost less than earlier ones. The curve slopes down. It often appears when the commodity is scarce right now.

Neither is a forecast. The curve shows what contracts for different dates cost today, not where the price will go.

A fund or a CFD provider that wants to stay exposed to oil cannot hold a contract past expiry. Shortly before it ends, it sells the near contract and buys the next one. This is the roll.

The point is the direction, not the size. If the spot price stays exactly where it is, but each next contract costs 1% more, rolling costs about 1% each month. The position loses value without the commodity price moving. In backwardation the same roll works in your favour. Real curves change every day, so the cost can be small, large, or even reverse.

An exchange-traded fund that holds futures follows the futures, not the spot price you see in the news. Over a long period in contango, the roll cost adds up and the fund can trail the commodity by a wide margin, even when the headline price ends higher. That is why our commodity pages show contract terms and exposure routes side by side, and why a fund's own documents should be read before buying.

A CFD (contract for difference) is an agreement with a provider to settle the difference between the opening and closing price. You own no oil, gas or gold. The provider sets its own price, usually derived from an exchange future for the commodity. Where contango matters is in how that provider handles the expiry.

From the public help page of one large provider (IG, read on 15 October 2026):

• Futures-based CFDs expire on set dates and are cash settled. A position not closed is rolled to the next contract by default, which means closing the old one and opening a new one. The client can ask not to roll, and the provider says it cannot promise to warn before expiry.
• Spot-style metals CFDs have no expiry. Instead the provider applies a daily funding adjustment to positions held past 22:00 London time. For spot metals it is based on the tom-next spread plus an annual admin fee of 0.3%; for base metals on the cost of carry plus 2.5% a year.
• Oil: the page notes that overnight funding adjustments on oil have recently risen; long positions pay more and short positions receive more.

So, depending on the product and the provider, the cost of the curve can show up as a roll adjustment, as a daily funding charge, or inside the quoted price. It is not always shown as a separate line, which is why two providers can differ for the same commodity on the same day.

ESMA's measures for retail clients (summarised from its public notice) cap leverage at 10 to 1 for commodities other than gold, require the provider to close positions when the account margin falls to 50% of the minimum required, cap total losses at the account value (negative balance protection), and require a standard risk warning showing the share of retail accounts that lose money. These rules limit how quickly a position can be wiped out. They do not limit the roll or funding charges.

1. Is it based on a future with an expiry, or on a spot price with daily funding?
2. What happens at expiry: automatic roll, forced close, or your choice?
3. Is the roll cost or funding adjustment shown on the product sheet, and how is it calculated?
4. Is the curve in contango or backwardation today, for this commodity? (Check the exchange, not the news price.)
5. What does the fund or provider say about past tracking against the spot price?