Monday, April 20, 2020

Negative oil prices

A fun tidbit sent to me by a good friend in the money management industry.

NYM WTI Crude oil is negative $37.73. They pay you to take it. The catch: you need an oil tanker and a place to park it. It went down from $-11.42 in the 10 minutes we were emailing about it.


From an email correspondent:
Exchanges are very careful to match approved warehouse space with the production capacity of the region surrounding the delivery point.
Warehousemen can do extremely well under conditions of surplus supply.  Where are the warehousemen?
I would expect that EPA regulations on constructing tank storage and pipelines have hampered the response time in developing storage capacity.
The latter I can believe. China can build a hospital in 10 days, but zoning permitting and many other regulations would make it impossible to build an oil storage tank in a mere 2 months in the US.

Where is the US strategic petroleum reserve?


  1. The cme website is saying that there is a lower limit of 1 cent per barrel:

    A technical problem? So let's see how this is sorted out!

  2. Yes, I've bought a swimming pool and will fill it with crude! :-)

  3. Seriously, the oil price for the US of A is a distribution question, hardly an allocation question. At some not too long ago price, the US was close to neither being a net exporter nor a net importer of petroleum products. Whether the country becomes a net importer or exporter on account of the new price increase welfare overall! It's only different people who benefit.

    Now me, I don't drive much, but I don't have an oil well either. :-)


  5. The extreme negative price might be related to a failure of a Bank of China's structured product. It's said that BoC failed to move its May position to June because it started too late.


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