Backwardation

In the futures market, a condition in which a price is lower in the distant delivery months than in the near delivery months. Normally, the price of a contract for future delivery of a commodity trades above the spot price because the owner of the contract is deemed to have the advantage of holding cash until the time of delivery and is assumed to be able to earn interest on that cash. When the spot price exceeds the futures price, it is known as backwardation, or an inverted market.