Roll Out The (Oil) Barrel! WTI Crashes Below $0 a Barrel With Traders Fleeing May Futures (Spot WTI At -37.63, May Futures At -24.92)

April virus brings May crashes. As in the spot price of WTI crude crashing to -37.63.

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(Bloomberg) — West Texas crude plunged into the negative for the first time ever. WTI has been under extreme pressure as demand has been destroyed by the coronavirus lockdowns and a oil price war between Saudi Arabia and Russia has flooded the market. In addition, a technical oddity kicked in today as traders fled the May futures contract ahead of its expiration tomorrow. The June contract is currently trading for over $22 a barrel in New York.

aprilvirus

May 20 Light Sweet WTI futures are DOWN to -24.92. But at least June and beyond futures prices are positive.

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Should we dance to the Oil Barrel Polka?

Here is the Grateful Dead’s version.

there will be blood teaser animation

A physical contract such as the NYMEX WTI has a delivery point at Cushing, OK, & date, in this occurrence May. So people who hold the contract at the end of the trading window have to take physical delivery of the oil they bought on the futures market. This is very rare.

It means that in the last few days of the futures trading cycle, (which is tomorrow for this one) speculative or paper futures positions start rolling over to the next contract. This is normally a pretty undramatic affair.

What is happening today is trades or speculators who had bought the contract are finding themselves unable to resell it, and have no storage booked to get delivered the crude in Cushing, OK, where the delivery is specified in the contract.

This means that all the storage in Cushing is booked, and there is no price they can pay to store it, or they are totally inexperienced in this game and are caught holding a contract they did not understand the full physical aspect of as the time clock expires.

 

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