The front month crude oil contract traded negative today. Actually traded down to negative $40 at one point. I am not an oil guy in the slightest, but Bloomberg does a nice job explaining the dichotomy
"The tens of billions of dollars traded every day in WTI futures are almost always settled financially, but any contract that hasn’t been closed out after expiry has to be liquidated with a physical delivery of oil if the parties can’t come to some kind of over-the-counter agreement. Those deliveries go to the storage hub of Cushing, Oklahoma, which is connected by pipeline to Canada, the U.S. Midwest, West Texas and the Gulf Coast.
That’s bad news if you’re long May futures, because if you don’t close out your position by the end of trading Tuesday, you have just a few days to let the seller know how you’re going to accept delivery, which is due from May 1-31. At the rate Cushing is filling, finding space is going to be difficult, especially for financial traders who rarely deal with the physical world." https://www.bloomberg.com/news/articles/2020-04-20/wild-oil-market-set-for-extra-volatility-as-contract-expiry-near
Here is a chart of the May Contract. Looks promising.
My biggest question is on the June Contract. Trading a much more reasonable $20.89 on last tick.
Only down from ~$70 in a couple of weeks. Does the current ~$42 spread between the expiring contract and new front month reflect the one month demand pickup in Crude? Or the assumption that storage will not fill in that time? With expiry just a month away, it seems to me that is a shockingly optimistic assumption.
This aged well
