20Apr2020 Market Close: Wall Street Slips As Oil Futures Collapse Into Negative Territory, DOW Closes Down 592 Points, WTI At -3.97, But Trading Hands At $22 Bbl, This Is The Chaos The Coronavirus Pandemic Has Unleashed On The Global Economy

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Here Is The Full Explanation Behind Today’s Unprecedented Negative Oil Price

Here Is The Full Explanation Behind Today’s Unprecedented Negative Oil Price

Courtesy of IHSMarkit’s energy vice president Roger Diwan

How did you end up with negative oil prices today? This happens when a physical futures contract find no buyers close to or at expiry.Â

Let me explain what that means:

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.

The contract roll and liquidity crunch that made the extreme sell-off today possible but it DOESN’T necessarily represent futures market conditions: NYMEX June settled today at $21.13.

The June contract is not out of the woods either: today’s …

The Market Is Breaking… Everywhere

The Market Is Breaking… Everywhere

Today was historic…

…for a number of reasons.

1) Front-month oil traded at an utterly irrational and unprecedented negative $43 intraday (this was not about storage into settlement, this was forced selling into settlement, then notice the bounce, and then later more selling.)

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US oil hits sub-zero for 1st time in history

US oil hits sub-zero for 1st time in historyThe price on the futures contract for WTI crude that is due to expire Tuesday fell minus $37.63 a barrel.

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