April 27

4/27 – A week ago (4/20) the spot futures contract for a physical commodity (WTI crude oil) closed at minus $37.63 per barrel. How is that possible? As an oil futures contract expires, you either need to sell out of your position or take physical delivery of 1000 barrels or 42,000 gallons of crude oil in Cushing, OK. Given large world oil supplies and the sharp decline in consumption due to COVID-19, U.S. land-based oil storage facilities are full. The cost to rent an oil tanker has risen over the past month from roughly $40k to nearly $200k per day. If you were stuck in a contract, you were forced to pay someone $37.63 per barrel to take the oil off of your hands. With most biodegradable agriculture commodities – milk, grains and even livestock – you can safely dump or bury unused inventory, making the lowest possible price near zero. Physically dumping crude oil is not an option.