What term describes a price pattern where forward prices are less than the current spot price?

The term that describes a price pattern where forward prices are less than the current spot price is backwardation. In a backwardated market, the price of a commodity for future delivery is lower than the current price. This situation can arise when there is a high demand for a commodity in the short term or a supply shortage, leading market participants to believe that prices will drop in the future.

Backwardation is often seen in markets where the cost of carrying the commodity (storage, insurance, etc.) is low or when there's an expectation of lower future demand or increased supply. This contrasts with contango, where forward prices are higher than the current spot price, representing a situation where future supply costs are expected to be higher.

Understanding backwardation is essential for analysts and investors, as it can influence trading strategies, risk management, and investment decisions in derivatives and commodities markets.