What are energy futures markets?
These are markets where energy contracts are traded on a daily basis. The most well known exchanges are the New York Mercantile Exchange (NYMEX) and the Intercontinental Exchange (ICE). Contracts traded on these exchanges are denominated in 42,000 gallon (1,000 barrel) increments. Trading is never for the current month, only for future months. More than 98% of the contracts traded are canceled without delivery ever being taken, yet these contracts have a profound and immediate effect on energy prices. Unfortunately, a majority of these trades occur on the ICE, which, unlike the NYMEX, is not subject to regulation by the Commodity Futures Trading Commission (CFTC). Are energy futures prices determined by supply and demand? In many cases, the prices set on the futures exchange have become disjointed from the supply and demand for petroleum products. The futures markets have turned what were once commodities into financial instruments. An example of the disconnect between the futures mark
