Contango in 2025: Impact on Australian Investors & Markets

Contango isn’t just market jargon for traders in suits—it’s a concept that can impact everyday Australians, from ETF investors to anyone holding superannuation with exposure to commodities. In 2025, with energy and food prices in the spotlight and ASX-listed funds offering more exposure to global futures, understanding contango is more relevant than ever. Let’s break down what contango is, why it happens, and how it could influence your financial decisions this year.

What is Contango? A Real-World Example

Contango occurs when the futures price of a commodity (like oil, wheat, or gold) is higher than the expected spot price at contract maturity. In simpler terms, it means future delivery is priced above what the market expects the commodity to be worth today. This typically happens in markets where storage costs, insurance, and other factors make it more expensive to hold the physical commodity for future delivery.

• Example (2025): Suppose the spot price for crude oil is $90 per barrel, but the September 2025 futures contract trades at $97. This $7 difference reflects storage, insurance, and demand for certainty, placing the market in contango.

• Australian context: ETFs like BetaShares Crude Oil Index ETF (synthetic) or gold ETFs tracking futures contracts are directly affected by contango, as roll costs can erode returns.

Why Does Contango Matter for Aussie Investors?

Contango isn’t just academic—it has real effects on investment performance, particularly if you invest in funds or products exposed to commodities. Here’s how:

• ETF Performance: Many commodity ETFs track futures, not physical assets. In a contango market, as old contracts expire and are rolled into more expensive new contracts, investors can lose out due to these ‘roll costs’. In 2025, with high volatility in energy markets, the impact of contango on returns is under the microscope.

• Superannuation: Some Australian super funds diversify with global commodities. If these holdings use futures, contango can erode their long-term returns, impacting your retirement nest egg.

• Trading Strategies: Traders may exploit contango via calendar spreads or arbitrage, but for most retail investors, it’s a silent drag on returns rather than an opportunity.

Contango Trends and Policy Updates in 2025

This year, several factors are shaping contango in Australian and global markets:

• Energy Transition Policies: Federal and state-level pushes for decarbonisation have increased volatility in oil and gas futures. This can amplify contango in energy markets, especially as supply chains adjust.

• Global Inflation and Reserve Strategies: Central banks, including the RBA, are closely watching commodity prices to guide inflation policy. Higher inflation expectations can steepen the contango curve, as future prices bake in risk premiums.

• ASX Product Innovation: The ASX has seen new commodity-linked ETFs and managed funds launched in 2025, with product disclosure statements highlighting the risk of contango for the first time. Investors are being cautioned to read PDS documents closely and understand the mechanics of futures-based products.

How to Navigate Contango as an Australian Investor

So, what can you do about contango?

• Know Your Product: Check if your ETF or fund tracks spot prices or futures. Futures-based products are more vulnerable to contango drag.

• Compare Total Returns: Look past headline performance and analyse historical returns after fees and roll costs. Some funds explicitly report the impact of contango in their performance numbers.

• Diversify: If you’re building a portfolio, avoid heavy concentration in commodities that are persistently in contango. Consider broad-based funds or those with active management to mitigate roll costs.

• Stay Updated: In 2025, policy changes and market volatility mean contango risks can shift quickly. Keep an eye on fund updates and market commentary.

Conclusion: Contango—A Hidden Force in Your Portfolio

Contango might sound like a technical footnote, but in today’s market, it’s a silent force shaping the returns of thousands of Australian investors. Whether you’re trading, holding ETFs, or planning your super, understanding contango—and how to navigate it—could make a real difference in 2025. Stay informed, scrutinise your investment products, and remember: sometimes, the most important risks aren’t the ones making headlines.