Flux Markets | Backwardation Skip to main content

Backwardation

A situation in the futures markets where the future spot price is expected to be higher than the current futures price

Backwardation is a market condition where the spot price of a commodity is higher than its futures price. It usually occurs when there is strong current demand or limited short-term supply, making immediate delivery more valuable than future delivery. In commodities trading, backwardation can signal supply shortages, high convenience yield, or expectations that prices will decline over time. It is the opposite of contango, where futures prices trade above spot prices.