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Financial term that indicates a "normal" situation, in which the price of the contract with a long-term expiration is higher than that with a short expiration. In fact, the long-term deadline involves costs:
- the right to have a certain amount of material upon expiration;
- warehouse costs.
Financial term that indicates an "anomalous" situation, in which the price of the contract with a long-term expiration is lower than that with a short expiration. Experts think that the short-term price level is not sustainable in the medium to long term and, therefore, will decline.
In the short term, a backwardation situation is characterized by:
- overdemand;
- supply reduction.