May Crude Crashes 94% to $1.02 - Wow

Mish

Traders are playing hot potato with front month contracts. Prices Could go negative.

There is nowhere to store oil for May delivery. That's what's behind the price crash. The CME says it will allow prices to go negative. 

The last day for May trading is today. Traders long the May contract are in deep trouble. 

June Crude

June Crude - 2020-04-20

The price of crude for June delivery is $21.09, down from $53.78 in February. Those rolling crude contracts expecting the price to go up have been hammered for months.

The Art of a Failed Oil Deal

Supposedly, Trump saved the oil market with his production cut deal with the Saudis earlier this month.

On April 14, the Wall Street Journal crowed about The Art of an Oil Deal.

I panned that idea on April 15 in The Art of a Failed Oil Deal. 

These were my comments.

Real Deal

As soon as storage facilities fill up, nations will have to curb production.

Trump did not negotiate a thing that was would not have occurred on its own by brute force of the market.

A cut of 9-10 million barrels was not enough. So the price fell after a brief market surge.

Hooray, the Saudis saved face. But what good did it do? The cuts were coming because they had to.

Voilla!

If demand destruction amounts to 20 million barrels per day, guess what?

Production will ultimately fall by 20 million barrels per day, deal or no deal.

I believe we now know which view was correct. 

COT View

The above chart shows speculators were long 195,355 contracts. 

Anyone long the May contract has now been carted out the door. 

I do not have a count as I believe most of those contracts are for June. Even still, those losses are massive. 

Some traders will be wiped out today.

Mish

Comments (36)
No. 1-18
ToInfinityandBeyond
ToInfinityandBeyond

Maybe the Fed needs to buy some oil futures. Seems like they are buying everything else to keep all the plates spinning.

Ted R
Ted R

WTI went negative around 2:00 pm E.S.T. Never happened before. Where the price goes from there is anybody'e guess. I wouldn't hazard a guess right now.

TexasTim65
TexasTim65

-$3.70 a barrel now.

A lot of traders are going to wind up with an awful lot of crude dumped on their front lawns since you must take delivery and there is no place to store it. LOL

Tim

LawrenceBird
LawrenceBird

A number of brokers are going to be sued for failing to know that these contracts could traded negative. One example is Interactive Brokers who does not allow a price below 0.01 except for spread orders.

bradw2k
bradw2k

Deflationary depression much?

SynergyOne
SynergyOne

Waiting for some hedge funds to implode as well, should be seeing that soon too I would imagine.

Six000mileyear
Six000mileyear

The difference between the May contract and spot price reflects completely full storage tanks globally. The June futures now reflect the belief oil use will be enough before expiration so delivered oil can be stored.

Tony Bennett
Tony Bennett

Over / Under of traders or persons who were oil rich jumping out of windows?

McSmarty
McSmarty

I used to trade on the exchange - this is the way things go with settlement of a contract. A contract holder must close out your position prior to expiry OR make or take delivery. If there were only two people and the long can't make delivery and the short can take it and the short is willing to play chicken until the end you get a result like this. It will embolden the shorts going into expiry next month but also people will be ready to try to take delivery should it get big time negative again.

CrazyCooter
CrazyCooter

Well, the old saying goes "the cure for low prices is ... low prices", however perhaps that should come with a caveat - "but, it doesn't matter if your dead."

Will have to check ANS tomorrow (data lags, they only have prices from the 16th at the moment):

Our budget up here is already thrashed and the legislature is grinding through the savings account ... not going to be pretty!

Regards,

Cooter

Herkie
Herkie

The price of WTI crude is now NEGATIVE $36.47 because there is just one day to go to close out the May contract and there is no place to put the deliveries. Storage is full. Meaning someone (s) is willing to PAY YOU to take it off their hands. It could also be a hedge fund blowing up.

mharris240
mharris240

It's now down to NEGATIVE (-$35.20 per barrel)...

USD/bbl. -35.20 -53.47

see bloomberg.com/energy

WildBull
WildBull

Time to place your aluminum foil helmets on your heads. PPE is critical in these situations.

Zardoz
Zardoz

This news is like hearing the iceberg tearing a hole in the Titanic. Nothing has gotten tippy just yet, and there’s an eerie calm....

moyerdere2
moyerdere2

Are the US strategic reserved full? if not, fill 'em up!

randocalrissian
randocalrissian

One has to wonder if even after the environmental fines of allowing Cushing to spill over once full (crude allowed to spill into the wild), just to take unlimited -$40 barrels, is a profitable trade even after those fines... interesting proposition.

Casual_Observer
Casual_Observer

Putin is in big trouble with Russian oil oligarchs.


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