The difference between the spot price of a commodity to be hedged and its futures price in the futures contract used for that purpose. For example, a basis differential may exist between the oil spot price (under certain contract specifications: grade, location, etc.) and the corresponding futures price for an oil futures contract.

Basis differential may also refer to the difference in the market value of a commodity (e.g., natural gas) at two different physical locations at the same point in time. It may also mean the difference in the value of an underlying commodity between different physical locations and/ or different points in time. Basis differential (or simply, basis) is most often traded by means of swaps (commodity swaps). The basis differential between two different points in time (or physical locations) can be captured by swapping the price of a commodity at one location for the price at a different location.

Basis differential is also known as a basis spread.