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Discussion Paper
Revisiting the Forecasting Potential of Futures Prices
Amid the largest global oil supply shock in history, oil futures prices moved up much less than many expected. The steep backwardation in oil futures from the Strait of Hormuz's closure sparked a spirited debate over whether futures prices were too sanguine about the risks of prolonged disruption. For institutions, including central banks, that use futures as a guide for market expectations of future commodity prices, understanding the performance of futures in forecasting is essential (Bernanke 2008, Baumeister 2023).