Contango is commonly defined as "The situation where the price of a commodity for future delivery is higher than the expected spot price". But how is this "expected" spot price determined? My understanding is that such a measure is highly subjective, as each investor would have their own opinion regarding how the price will change in the future. How then can the futures price converge on the expected spot price, when it is not known?
My second question, which follows from the first, is what shape does the contango curve take? Is it increasing or decreasing? My understanding is that if the futures price is higher than the expected spot price, and the two must converge at expiration, the curve should be decreasing (see image 1). However, when googling contango and backwardation curves, I get conflicting results, with some images showing the contango curve as increasing and others as decreasing (see image 2). Why is that?