Every commodity that trades futures has a curve — a price for each delivery month, from the front month out a year or more. That curve only ever takes one of two shapes.
Contango is when futures prices are higher than the spot price, and each successive delivery month is priced higher than the last. Buyers are paying a premium to lock in supply for later, largely to cover the cost of storing and financing the commodity between now and then.
Backwardation is the opposite: futures trade below spot, and the curve slopes downward. It shows up when the market values having the commodity in hand right now more than having a promise of it later — usually because supply is tight today.
Contango is the "resting state" for commodities with real storage costs — crude oil, natural gas, most metals. Someone has to pay for the tank, the warehouse, or the financing on the barrels sitting in it, and that cost gets built into the price of later-dated contracts.
Backwardation shows up when that logic gets overridden by a supply squeeze: a refinery outage, an OPEC cut, a drought hitting a grain harvest, or a cold snap driving spot natural-gas demand. The market pays up for immediate supply and discounts the future, on the assumption things normalize by then.
Seasonal commodities move between the two on a predictable clock — natural gas often tightens into backwardation ahead of winter, gasoline ahead of the summer driving season, and grains around harvest — see commodity seasonality for how that pattern plays out across the calendar.
The curve's shape sets your roll yield — the gain or loss from closing an expiring contract and opening the next one out. In contango, rolling forward means selling low and buying high each cycle, a persistent drag on long positions. In backwardation, the roll works in your favor. This is a big part of why long-dated commodity ETFs can lag the spot price for years at a time, independent of where the commodity actually goes.
Commodity Hub's forward curves & term structure tool plots the live curve for every tracked commodity, with a calendar and crack-spread monitor built on top of it — see crack spreads for the refining-margin version of the same idea. Open the app to check where any commodity sits right now.