This study investigates the dependence structure between correlated petroleum forward curves. After decomposing the term structure into level, slope, and curvature shocks we develop a flexible multi‐regime error‐correction factor model of the dynamics of the joint evolution of commodity pairs' curves. Volatilities and disequilibria across regimes are markedly different whereas the information content of the suggested framework is also tested in forecasting and value‐at‐risk experiments. The findings of this study have important implications for energy trading and risk management being particularly useful for predicting short‐term spreads and the correlation matrix among traded contracts. © 2014 Wiley Periodicals, Inc. Jrl Fut Mark