Contango

You are a commodity futures trader. The future price for a contract that expires in a year is at $100. However, the expected future spot price is sitting below that price.

The market is in what is known as “contango.”

This is a situation where buyers gladly pay more money for a commodity in the future than they would for the spot price. They would pay the premium because they're probably not thrilled about paying for storage or other costs if they purchased that oil today.

The futures curve is therefore upward sloping, as prices between the spot and futures price would need to converge. Should that not occur, investors will be presented with a unique opportunity to arbitrage trade the commodity and pocket the difference between the contracts.