A futures contract is an exchange-traded agreement to buy or sell a set quantity of a set specification at a set future date. Everything except price is fixed in advance, which is what makes the contracts fungible and therefore liquid. One WTI contract is 1,000 barrels; one Brent contract is 1,000 barrels; the tick is one cent, so a one-tick move is ten dollars per contract.
Most contracts are closed out before expiry rather than delivered. A position is opened to take or hedge price risk, not to receive barrels. Closing out means trading the opposite side of the same contract, at which point the exchange nets the two and the position ceases to exist. Delivery still matters, because the possibility of it anchors the contract to the physical market.
Two mechanics distinguish futures from an ordinary forward agreement, and both exist to remove counterparty risk.
The first is the clearing house. You do not face the trader on the other side of your fill; you face the exchange's clearer, which faces them. That is why you can trade with a stranger for size and never think about their solvency. The second is daily margining. Rather than settling the whole gain or loss at expiry, the clearer marks every position to the day's settlement price and moves cash between accounts overnight. A position that has moved against you consumes cash every day it stays open.
Daily margining is the part that surprises people, because it converts a paper loss into an immediate cash demand. A hedge can be economically perfect and still fail in practice: if the hedge leg loses money before the physical leg makes it back, the margin calls arrive first and the offsetting gain arrives later. That timing mismatch has bankrupted otherwise correctly-hedged businesses, and it is a liquidity problem rather than a price problem.
Liquidity is not spread evenly across the contract months either. It sits in the front months and thins along the curve, which is why a spread quoted between the first and second month is tradeable in size and one quoted between the fortieth and forty-first is largely theoretical. See liquidity for what that costs.