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Answer: Oil’s lower storage and transportation costs diminish the impact of seasonality and imply an oil forward curve with less swings (a smoother forward curve)
The key distinction is that **oil is easier to store and transport** than natural gas, and it is traded in a much more integrated global market. As a result: - oil futures curves tend to be **smoother**, - seasonality has less impact, and - the curve shows fewer dramatic swings than natural gas. So **D** is correct.
Author: Manit Arora
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Question 188.6: According to McDonald, which of the following is true about the key difference between the oil forward (futures) curve as compared to the natural gas forward curve?
A
As they are substitutes, their archetypal forward curves are essentially similar
B
Supply and demand impacts the shape of the oil futures curve in a way that they do not impact the natural gas forward curve
C
The long-term (or long-run) forward price of oil is more volatile than the long-term forward price of gas due to supply shocks
D
Oil’s lower storage and transportation costs diminish the impact of seasonality and imply an oil forward curve with less swings (a smoother forward curve)
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