Contango occurs in a market when futures prices for a commodity are greater than the current spot price. Backwardation happens in a market when the price of futures contract is below the spot price of the same commodity.

The reasons for Contango and Backwardation are mostly supply and demand. For example:

  1. If copper is currently abundant and has uninterrupted supply, it might follow Contango because the current spot price will be lesser due to high supply.

  2. If copper is currently scarce and little supply, it might follow backwardation because the current spot price will be higher due to less supply.


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