Some extreme fun and games in the Oil markets overnight as CL1, the generic first contract for WTI crude went below zero, hitting minus $42 at one point as the May contract expired. By contrast, as the chart shows, the CO1 contract, which is for Brent Crude ‘merely’ hit $21, a level close to where the June WTI contract now trades. We couldn’t help but think of these guys..
The modern day Duke brothers are as likely trading in Korea or Japan as New York, but it is clear that some people had a very bad day in the Commodities markets. The reason for the difference between the two contracts is that WTI – the West Texas Intermediate Crude – requires physical delivery at Cushing in Oklahoma, something which is extremely difficult to achieve at the moment, not least as we explained a couple of weeks ago because almost all available storage is full. Indeed, according to Bloomberg, Cushing is basically full. Brent by contrast can be delivered offshore.
Chart 1. From +$63 to -$37 in One Quarter
As to who took the proverbial bath, it’s most likely to have been fast money retail, as institutional investors normally roll contracts much earlier, never letting them actually expire. Bloomberg reports problems with exchanges in South Korea, which froze as they quite literally were unable to input a negative price. However, it would be nice to think that there were some modern day Duke Brothers on one side, and the little guy on the other. Looking good Lewis…
