When the price of a spot or near-term contract is higher than the price for forward deliveries. This is applied particularly to commodities, for instance when a supply shortage pushes up spot or near-term prices but the futures price remains steady because larger supplies are expected later.

The reverse situation, when spot prices are lower than futures prices, is called contango. Backwardation is also used in the London stock market to describe the fees and interest charged on delayed settlement of stock futures transactions.