Did Authorities Do Enough To Find Out Why Oil Prices Went Negative?

oil-demand

In late April this year, Wet Texas Intermediate nosedived below zero, sending the market into a frenzy. The frenzy ended a day later when WTI rebounded to positive territory. Now, the Commodity Futures Trading Commission has issued a report on the unprecedented event. Still, it has failed to answer many questions. The report identified three fundamental factors and five technical factors that contributed to the slump in the U.S. oil benchmark. Among the fundamental ones, the CFTC identified the excess supply on global oil markets, which fused with the unprecedented demand loss resulting from the pandemic-prompted lockdowns and worries about a lack of oil storage space.

Among the technical factors, the CFTC noted the much higher-than-usual open interest in WTI near the expiry date for the May contract and a decline in the liquidity of this contract. The authority noted that on April 20, the day when WTI fell below zero, exchange-based control mechanisms had been triggered, but even they had not been enough to stymie the drop.

Click here to read the full article.

Source: Oil Price

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *