Is futures price a forecast of future price?

A question I've seen too many times in relation to oil markets during the US-Iran war. As I explored in Is anyone NOT yet trading oil?, there's more to futures markets than first appears and this question is a natural one to ask.

Fortunately the answer is clear.

No. The futures price is not a forecast.

It is the current cost of locking in delivery of a specific commodity at a specific place and time. For WTI, that means 1,000 barrels of light sweet crude at Cushing, Oklahoma, on a specific date. Every word matters - grade, location, and timing are all baked into the price.

That cost reflects the current spot price, storage costs, financing, and something called the convenience yield - the value of having physical oil in your hands right now rather than in three months. Refiners and industrial buyers pay a premium for immediate delivery because running out of oil shuts down their operations.

When the physical market is tight and convenience yield is high, buyers pay up for near-term delivery, pushing the front-month price above deferred contracts. This is backwardation. When supply is abundant and storage is cheap, the opposite holds, deferred contracts trade above spot. This is contango.

The extreme backwardation in oil markets since the Strait of Hormuz closure is not manipulation or price suppression. It is refiners and industrial buyers paying a premium to secure oil they need now, encoded precisely in the futures curve.

The front-month futures price is the price of oil right now. The six-month futures price is the cost of securing delivery in six months. Neither one is a prediction of where oil will trade at any future date.