In energy markets, this term refers to a situation where spot commodity prices are higher then future prices. In the oil market, this situation might reflect the supply and demand condition. This situation happens when the demand is greater than the supply and this makes the spot price higher. Oil crises due to a supply reduction and disequilibria in the energy markets tend to drive the oil market in a backwardation situation. The contrary of Backwardation is Contango.
Editor: Claudio DICEMBRINO