The Crude Curve
For years, nearly all trading in the energy markets was in short- or medium-term contracts. But since 2004, the number of open long-term contracts has shot up, according to the Commodity Futures Trading Commission.
"What we saw in the past was sort of a herd mentality where all the traders on the floor would trade the first and second month," says NYMEX Floor Trader Anthony Grisanti of GRZ Energy. "What you're seeing now since the advent of electronic trading is a lot of brokers or locals on the floor don't trade the first month anymore. They keep an eye on the second and third month."
A report recently released by the CFTC finds that energy markets are very liquid in the long end, robust in terms of the number of participants, and co-author Dr. Michael Haigh, an associate economist at CFTC, says markets are working efficiently.
"We have to believe that market wisdom is such that these prices are the best forecaster of future prices in these contracts," Haigh said. "We see a deepening of participation in these markets which lends faith -- I would say -- to the likelihood these prices are more reflective of what might occur in the future."
Analysts and traders are encouraged by the maturation of the long-dated oil futures market, though cautious to use it as a source of long-term price predictions.
Grisanti says it's important to look a few months out to get "a true indication of the value of crude." He sees traders rolling into longer-term contracts to avoid the volatility of the spot month.
CNBC's energy reporter Sharon Epperson will focus on longer-term prices by showing viewers the crude curve each morning at 8:30 am New York time, before oil trade opens.
The goal: to give viewers a feel for long-term prices by sidestepping intraday volatility.