Reading a Forward Curve:
A Primer for
Customer Conversations

01The Setup

Forward curves price the expected value of energy at delivery in the future. They're the market's collective best guess — the price at which buyers and sellers are willing to trade today for delivery later. Not predictions. Market-clearing prices.

Curves have shape: contango (future higher than current), backwardation (future lower than current), or flat. The shape tells you about market expectations and storage economics. The shape changes over time — and the change is information.

Curves also have level: the overall price band. Level shifts (parallel up or down) reflect changes in supply, demand, or risk premium. Twists (level stays similar, shape changes) reflect changes in expected timing of tightness or slack.

02The Data

The shape tells you about market expectations. Backwardation often signals near-term tightness expected to resolve. Contango often signals expected future tightness, storage costs, or — in commodities like power — anticipated capacity constraints in later years.

The level shift tells you about current market conditions. War, weather, demand shock, regulatory change — all show up in level moves. Distinguishing 'temporary level shock' from 'structural level reset' is hard but essential.

The customer doesn't need to read the curve themselves. They need their advisor to translate. The advisor's job is to look at the curve, understand what it says, and convert it to 'lock now,' 'wait,' 'split term,' or another concrete recommendation.

03The Implication

The curve is a procurement input, not a procurement decision. The decision combines curve shape, customer risk tolerance, customer cash flow constraints, and other context. Treating the curve as the answer rather than as input is a category error — and a common one.

Advisors who can explain the curve clearly to non-energy executives build trust that survives volatility periods. The customer who understands why the recommendation makes sense — not just what the recommendation is — stays through the cycles.

04The Recommendation

1. Always show the customer where the curve is, where it was 30/60/90 days ago, and what's been driving moves. The narrative is the point, not the static snapshot.
2. Translate shape into recommendation language: 'the market is pricing X scenario; here's what to do about it.' Customer doesn't need to internalize 'backwardation' as a concept — they need to know what backwardation implies for their renewal.
3. Be explicit about what the curve doesn't tell you: weather surprise, geopolitical shock, demand response from large customers. The curve has known unknowns; surfacing them keeps the conversation honest.
4. For sophisticated customers, layer in basis and volatility; for less sophisticated, just the strip. Match the depth to the customer's ability to use it.

Energy procurement done right is curve-aware. Energy procurement done wrong is calendar-aware (see BR-01). The advisor's job is to translate the curve into customer language without dumbing it down or oversimplifying. A customer who finishes a meeting knowing what backwardation means and why it matters to their next renewal is a customer who'll stay.