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Oil plunges below zero for first time with May contract ending (bloomberg.com)
592 points by adventured 37 days ago | hide | past | web | favorite | 515 comments

Note that this is for the May contract, which closes tomorrow, and anyone left with a contract then will have to actually take delivery of the physical product. Since we are in supercontango (oil storage is full, causing spot prices to be significantly lower than forward prices), I am guessing that traders who are still holding on to contracts and don’t have available storage have to unload contracts pretty quickly.

The June contract, where most of the trading is happening, is at around $22, and the July contract is $28.

What I don't understand is why the sudden move today? Did the longs think they had a place to put the oil on Friday but found out over the weekend they had no place to put it? Just seems like you would know what to do with the oil on Friday. Note this is not a rhetorical question, I would sincerely like an answer.

> What I don't understand is why the sudden move today? Did the longs think they had a place to put the oil on Friday but found out over the weekend they had no place to put it? Just seems like you would know what to do with the oil on Friday. Note this is not a rhetorical question, I would sincerely like an answer.

Guys like myself, an ex fund manager, could be tourists in the oil market. I know I was, speculating occasionally on oil without knowing a whole lot about the details. Plenty of macro guys are similar, they bet on the large movements as the opportunites present themselves and don't worry about the details.

So what has probably happened is some of these tourists have had a few contracts left over that they forgot about or didn't discover in their position keeping until their prime brokers phoned them, and they had to dump into a market under very special conditions. Hopefully not very many contracts.

In normal times if you screwed up and had to do delivery, it stil wouldn't be a big problem, because the storage is available and you essentially just buy it (by trading with a guy who actually knows how to organize it), costing relatively little.

This reminds me of Brian Hunter [0] of Amaranth fame. He was on the wrong side of a huge (multi billion USD) long trade on Natural Gas. When faced with losing it all, he doubled down. Blew up Amaranth. $9B USD hedge fund blew up basically overnight. Margin calls, etc, etc.

Disclaimer: I worked for the hedge fund at the time that bought Amaranth's holdings for pennies on the dollar. Was supposed to be a joint buyout with JP Morgan Chase, but Chase couldn't calculate the risk in time before closing and left us with all of the eggs in the basket. We ended up making a killing on the deal as we had the assets to weather the margin calls. I still can't believe anyone gave B.H. any money to trade with after that, but someone did...

[0] https://en.wikipedia.org/wiki/Brian_Hunter_(trader)

One thing is clear to me - somebody is getting fired this week. Not sure if it's a hedge fund or producer, or a trader or a team, but someone is getting fired.

Everyone is getting fired.

Not likely. This could actually be one person/team who was out of balance on their book.

Back in 2008 when oil hit $150, it was due to a single trader. Needless to say, everyone in the industry was pissed at him afterwards.

Everyone in the economy is getting fired.

I recall Amaranth was recruiting on campus that week, and cancelled all interviews the very next week.

That man is one of a very small group according to this list:


Arguably he wasn't rogue, judging from John Arnold's account of the situation[0]. He just made way to big of a trade.

Think his account is somewhere between 10-20 minutes in this video 0. https://www.youtube.com/watch?time_continue=68&v=G6zFBzadTw0...

A really risky (but I think worth the risk) bet is to buy the front and sell the back. You will receive a huge credit, and as long as you close out the back leg below what you sold for, you’re in the clear.

This isn't possible, except for people who can deal with the physical logistics. If you buy the front, you need to put the stuff somewhere for a month.

Chances are the people who got stuck selling at negative prices were actually doing just what you describe, they just weren't planning on the spread blowing out from physical issues.

I don’t see supercontango lasting forever. At some point oil demand will rise. Even if it’s a small rise.

And you typically should close out combination orders well before expiration.

How do you not get eaten alive by the negative roll yield (super contango) if you don’t have access to storage?

It’s called super contango.

And storage has not run out yet. Cushing is not full. The problem is traders are anticipating storage will become very expensive as remaining capacity decreases, so if you’re holding on to May contracts and you’re not using the oil because there’s a glut right now then you’re going to be paying a lot more to keep storing the oil for future months as storage costs go up. The huge discount reflects that cost.

Sorry to miss it, but how does this answer my question?

I asked why they weren't prepared on Friday. Storage has been expensive and getting more expensive for weeks. We've been in a massive contango for weeks. Why weren't they prepared on Friday for physical delivery?

Most oil traders don’t actually want physical delivery. They are just trying to profit off price movements. Traders have moved on to June contracts already. There’s no volume on May contracts at this point. No one wants to actually pay for physical delivery so the price is tanking since there are no bids as we get closer to expiration tomorrow.

So does this mean that without bids there are potentially many traders, not refiners or tank farms, holding those contracts still? That those traders will get stuck with taking delivery because they couldn't unload their contracts?


People with just a paper office, used to deal in numbers rather than anything physical, and with no place to store physical goods, will now have to figure out where and how to store lots of oil?

Having worked in the finance industry my entire career, most (responsible) firms have means for dealing with taking physical delivery. Less responsible firms, not so much and may be royally screwed if they have to take delivery. I've heard anecdotally of a firm that had to take physical delivery of a shipment of coal. They didn't have plans in place, but because they had an address on a river, the coal arrived via barge. No, I don't recall the name of the firm, and yes, it's just an anecdote/hearsay.

That story, or at least a very similar one is documented on the the daily WTF:


I've no idea if it is true, but it makes for a funny story at least.

They would if they didn’t offload the contracts somehow, hence the negative prices. They are paying to get rid of that obligation.

They already know how to store lots of oil. They can and do rent supertankers for example.

No. Their prime brokers will force them to sell it at the low (negative) price.

You still haven't answered the question...

I'm going to try and translate the simplest concept that tempsy is saying.

The sellers were looking to sell for most of last week, however there fewer buyers as the contract approached its end, and those who were willing to buy wanted a lower price:

Volume of transactions on Friday was 344k, Thursday was 111m, Wednesday was 147m. In the past 30 days, the low was 686k (ex Friday), and the high was 459m. Traders slowed their buying so the market became one sided.

Because trading is hard and sometimes humans are dumb.

-Former dumb oil trader

> -Former dumb oil trader

+1 just for admitting it. :)

That still doesn't answer: why wasn't it anticipated and reflected in earlier pricing (even if volume-weighted it would be a much smaller drop, it still seems to have been missed even from futures options)?

If you have the answer to the question you are asking, you should change careers into oil contract trading; you'll probably make a bundle.

In short, the reason nobody anticipated it is because the future is unknown. The reason any market is unpredictable is because there are too many variables to account for.

I think he's asking why the market didn't have a better estimate of storage capacity and utilization and what changed in the estimate from yesterday to today.

I think that has to do with how people sometimes do analysis for trading. There's fundamental analysis, which looks at exactly that when attempting to determine the price to bid for a security, but then there's the bubblier "technical analysis" which really just looks at historical and current trends and attempts to divine whether buying now means you might be able to sell in the future.

I'd imagine people just assumed perfect liquidity here, and that they'd be able to sell even "at a small loss which is better than nothing," not realizing that nothing or negative (i.e. you're gonna pay somebody to take this oil off your hands or build your own tanks) is a valid outcome.

> assumed perfect liquidity

too bad the oil market is ... viscous.

I'm going to take a stab at a possible reason the "market" didn't see this coming: Everyone expected the US to top off its strategic reserves, which so far hasn't really been happening. Now that You could be paid like $37 (west Texas crude closed at -$37.63) dollars/barrel, maybe the US will reconsider. I certainly wish I could store a few thousand barrels...

US companies don't want to stop producing oil. Couple that with the Russia/Saudi Arabia skuffle going on over oil prices, I'm not surprised. What surprises me is the absolutely rapid/rabid decline in the price. It just seems like pure insanity to me...

> Now that You could be paid like $37 (west Texas crude closed at -$37.63) dollars/barrel, maybe the US will reconsider.

Indeed, it looks like the US is reconsidering:

President Donald Trump said Monday the U.S. is "looking to" add as many as 75 million barrels of oil to the Strategic Petroleum Reserve. Trump spoke after an historic day in the oil CL.1, +103.61% markets, in which the May WTI crude contract closed at -$37.63 a barrel, a one-day drop of 306%. Trump said he was considering the move "based on the record low price of oil," and that the action would "top it out." Speaking at a White House press briefing, Trump said, "we'd get it for the right price."


Based on a vague memory from years ago - so I could be totally wrong here - you're assuming knowledge he doesn't have.

Correct me if I'm wrong, but: The people doing the trading are middlemen, and have no capacity period. They expected to be able to sell it all off to the energy companies, even at a loss, so they normally don't accept any physical product. But the energy companies ran out of capacity - something the middlemen (traders) don't have direct knowledge of - so got caught unexpected with contracts they can't sell, and now have to accept the physical product.

> That still doesn't answer: why wasn't it anticipated and reflected in earlier pricing

Because despite the people that like saying all future events are reflected in current prices, the fact is humans, both individually and aggregated into markets, are imperfectly prescient, thus future events are basically never perfectly priced in to to current market prices.

Nobody says that. All KNOWN future events are priced in. We are not doing divination here.

> Nobody says that.

People say things to the effect of “if it is going to happen, it is already priced in” all the time, on HN even.

> All KNOWN future events are priced in.

There are no such thing as known future events. Market participants estimation of the likelihood of future events, weighted by inclination and capacity to invest, are priced in.

The answer is, literally anyone with cash could sign up today and have an oil contract tomorrow. It is extremely easy to take part in oil contracts trading and those people who basically just have an office can't actually keep the contracts now and must unload. Contrary to what people think, you don't have to be an expert or have any special knowledge to trade physical contracts.

It might go negative - no, just has, as I write - if you were bag holding on Friday you might carry on in the hope of some recovery, but you don't want physical delivery so you were always going to sell today no matter what; closer it gets to expiry, or to $0, the more push has come to shove and you're finally closing your position.

Most traders don't have any oil to sell. What is left are those who have storage space making a deal on the traders too stupid to get out already. This isn't many, but since there is no demand those with storage space can offer very low prices and get the rest of them.

things happen when you get closer to contract expiration. Today is closer than Friday.

-$37.00 is a distress price, just for the unwitting investors who agreed to play “Hot Potato: Bloodsport.”

By definition, you’re looking at the price for people who wouldn’t want to play, if they could avoid playing. They are literally over a barrel. If they don’t get out, the broker gets to screw them even worse at the deadline.

Volume was up, because some people were going through heroics to close their position at all costs.

But the end of day price is for those who got screwed: the truly unaware who didn’t realize they were out of time, or didn’t think about it going past $0. It’s probably relatively few people, despite today’s volume. When you lose control, someone agrees for you that you’ll pay $37/bb to get out.

It's only a paper loss until you sell. Everybody was hoping and praying things would change and now that it's abundantly clear that it's not changing, they're desperately trying to unwind their positions.

Not really. If you hold contracts at expiration (May expires tomorrow) then you are forced to take physical delivery of oil. No one wants oil right now, and if you take physical delivery you’re going to have to pay big premiums to store oil at Cushing. The discount reflects the premium storage costs.

Most oil traders just want to profit off price movements and not actually own physical oil. There’s no volume on May contracts now they’ve all moved on to June.

Do you know what happens if you can’t take physical delivery? As in the financial consequences including penalties assigned by the exchange?

Chapter 200 doesn't go into much detail but chapter 7 (for metals) explains how the exchange will facilitate an independent middleman to store until arrangements are made and they will bill you for that service.

I have not been involved in chapter 200 operations but I've heard socially this occasionally happens relating to substandard product. "We agreed on light sweet crude in the contract but you tried to deliver sour tar". The exchange knows its all going to get dragged into court eventually, so they try to be fair and transparent and well documented. There are plenty of people renting tank space as a normal business operation.

I don't think you're going to get Force Majeure protection. That's for something neutral to all parties like a hurricane, not one side of the contract didn't feel like closing out and doesn't have tank space lined up.

My understanding is you still take delivery. It might be in the form of a fleet of tankers or barges arriving at your office. But, you will take delivery, whether you like it or not. Any responsible trading firm that deals in futures should have mechanisms in place to deal with physical delivery.

Futures contracts are daily settled. So the difference between starting price and ending price has to be paid at end-of-day settlement.


Prices didn't crash until this morning. Nobody was taking much of a loss before then.

>I asked why they weren't prepared on Friday.

What, exactly, do you expect them do to "prepare"? Friday they had more time to unload the contracts, and today they have less.

How to prepare:

Sell futures on Friday, buy today (to close out the position). Profit from the predictable price difference.

They have been trying to sell, but none was buying. The closer you get to the expiration date, the lower you are willing to go to sell. Since contracts expire tomorrow, traders are willing to go all the way to avoid getting physical delivery.

That's why I was suggesting the opposite:

(Short-) sell last Friday, buy today at about 0 to close the position.

Was it predictable tho?

Yes, it was predicted successfully (by everyone who is no longer holding a contract). It was also not predicted successfully (by everyone paying through the nose so they won't have to find a place to stash some barrels of a volatile compound).

It wasn't predicted successfully on average. Otherwise Friday would have already anticipated today's price.

How far do you want to take that argument? If successfully predicting it would mean that prices dropped to zero on Friday then shouldn't that have also been successfully predicted and impacted the price on Thursday? What about Wednesday, Tuesday, Monday?

Yes, that's exactly right.

But no one expects perfect predictions far into the future.

Well, that was exactly the question!

Read “Fooled by randomness” by Nassim Taleb.

If cushing is not full, why aren't people buying at $2 a barrel now and storing for one month, selling the June contract at the same time and collecting a $20k profit per contract?

This is a good question. The fact that people are not buying the May future at -$37/bbl and selling the June contract at $20/bbl tells you that Cushing storage must effectively be full and that the theoretical storage figures quoted in research are not practically usable (at least at short notice). It's very hard to imagine any practical means of storage that isn't wildly profitable to utilize for $57/bbl/month.

Mostly the storage cost. Let's go extreme, say you managed to grab the contract at $0, which may actually happen today. Now you need to 1) Find transportation and storage 2) Sell it on the market as quickly as possible, at a reasonable cost.

Pretty tough TBH, unless someone is planning a war in Middle East and is grabbing up the contracts and you know about it...

Because of storage costs and uncertainties, it wasn't only the saudi-russia fallout that caused this - demand has literally flatlined comparatively due to lockdowns everywhere.

>why aren't people buying at $2 a barrel now and storing for one month, selling the June contract at the same time and collecting a $20k profit per contract?

Good question. The answer is because they don't think it will be profitable. Why aren't you?

Me, personally, because I don't even have a futures account at a broker that will let me take physical delivery, nor do I have any experience whatsoever renting tank space at the Cushing facility (which I didn't even know existed before today). But I guess the answer to my question seems to be that the cost of storing one contract worth of oil will, unbelievably, be more than $20,000 for the month.

I've never been to Cushing Oklahoma. I feel like it should be possible to build a big tank in a week or two. Why isn't available storage space skyrocketing?

I honestly don't even know if I can fathom how you could get permitted to build such a tank in a couple of weeks, but the answer to why that isn't happening _right now_ is probably because nobody wants to lay out a bunch of capital for a business that might do well contemporaneously but that has no future.

Either things settle back down to normal at some point, in which case you've made some revenue, but probably not recouped your investment. The Cushing facility managed to build 7 million bbl capacity in the early 90s for $60 million. I expect it would cost $80-100 million to build today. Current (inflated) storage costs are 50 cents per barrel. Let's say that rises a LOT and skyrockets to $2 - that's a gross of $14 million per month. Assuming $0 in overhead, you'd need for this contango to last for another 7 months to break even. If we assume something like a 30% margin, then you'd need it to last around two years.

Alternately, things don't return to normal. The market becomes depressed enough that airliners barely fly, and the global world consumption falls. The oil you're storing becomes cheaper to the point that storing it costs more than buying it, and there's nobody to sell it to. Your customers default, and your investment quickly becomes the thing that bankrupts you.

7 million barrels * $30 a barrel = 210 million just to take the oil. Plus $20 a barrel when you sell it brings you to $350,000,000 in revenue on a 7 million barrel tank. What am I missing, other than not being able to build the tank fast enough?

I mean, if you have a spare $300 million lying around, that sounds like a fantastic arbitrage opportunity, and (napkin math time) if you're holding the barrels for more than 10 months, that'd be the way to do it.

You are probably right. And given that June futures went down since yesterday, and the May futures went up, someone is probably doing that right now.

Great answer! Now let's forget about storing to sell later at a profit, at negative 37$, can't you just burn it for a profit?

Assuming you can transport a 100+ pound liquid filled drum to a disposal facility that meets federal guidelines for less than that cost, and don't care about the environment, absolutely... but the real trick here is in knowing that the people who are already using oil and have the capacity to store it ... are... so other than just burning it, for a couple hundred million, you could probably supplant your stationary oil consumption with a non-petroleum alternative.

It is ironically the portability of oil-refined products (gasoline, diesel) that makes it so appealing for things that aren't stationary -- planes, cars, etc.

There are regulations covering storing enormous quantities of oil, including certification of the holding tanks etc.

For example, any container over 55 gallons is subject to EPA regulation and counts towards the total permitted site quantity. Storing more than 1,320 gallons above ground requires the site to have an approved SPCC (Spill Prevention, Control, and Countermeasures) plan.

You can store 42,000 gallons below ground but that requires excavation, permits etc.

Basically: it's difficult to do on short notice.

Further reading: https://www.epa.gov/ust/aboveground-storage-tanks

There is a little bit more to an oil tank than just steel walls. You need proper foundations, fire prevention systems, disaster plans, probably get hooked up to the pipeline network, etc etc etc. Even if it were quick, the amount of oil being pumped up is massive and you need more than a few tanks to store it all. Finally, tanks are long term infrastructure and it might not be profitable to build out storage too much just in the hope of catching once-in-a-lifetime negative pricing events.

Yeah, it's worth building these tanks safely. There was tank fire last year in Bay Area after a quake: https://www.youtube.com/watch?reload=9&v=KMZjfWRXgTs Even if there is different level of risk and safety concern, and air quality regulation in rural Oklahoma vs urban CA bordering a highway, these can catch fire dramatically.

One point made when that fire occurred was that the tanks are placed in earthen basins, so that when tank fails, the flaming fuel just fills the basin, minimizing risk of spreading to neighboring tanks.

Speaking of oil tank fire prevention, videos of foam fire suppression systems are pretty impressive. A gasoline tank fire goes from massive flames billowing into the sky to totally extinguished in 40 seconds. For example: https://youtu.be/OxLPvNdv2t4?t=210

It's not possible to build a tank in two weeks, even if you had all the material and equipment at the ready. Plus, capital intensive for what may only be a spike in storage.

These physical goods are much harder to store than bits.

> I feel like it should be possible to build a big tank in a week or two.

When is the physical settlement of the contract? My understanding is that physical settlement of the May futures contract is 21 April (that is, tomorrow).

So you don't have a week or two to build your big tank. It needs to be finished tonight.


Looks like first delivery isn't until may 1 according to that page.

Our intuitions are so different I'm not sure if you are joking or not.

My guess is that the build time is 1-2 years with 5 years of permitting up front. I also imagine building capacity is capped with a limited number of trained engineers/welders.

Many have answered about storage costs. Easy way to think about it might be a grocery store.

You hear about a sale on cereal for $0.01 a box. Great deal but then you find out that you can't walk there, you can only take Lyft/Uber and it costs $100 each way to get to the store. So in reality its not as good a deal as it sounds.

>you can only take Lyft/Uber and it costs $100 each way to get to the store

Hard to follow this analogy

The part about depending on only semi-reliable third parties for your logistics, or the part about the supply chain costs being 1000x your material cost?

The part where a trip to the grocery store costs $100

Surge pricing because everyone wants to get the deal there

What's stopping you from taking a car or a bike ride to save $100?

Because you can't just rent a U-Stor-it space, and dump a bunch of full oil barrels into it. You need a specialized facility.

And all of those facilities are full. The ones that aren't are charging an arm and a leg for storage services.

What about tankers?

Also full. The proportion of the global tanker fleet that is just full of oil sitting off coast near refineries is at an all time high.

A lot of speculators were betting that oil prices were going to go up and had rented ships and filled them with oil they though was cheap, before COVID-19 even hit. Since then, oil prices have absolutely cratered.

How do these tanker contracts work?

Are speculators leasing the tankers on a month to month basis? What happens when/if the tanker isn't offloaded at the end of a contract?

Typically most tankers are owner operated, under a long-term charter or on the spot market they are doing jobs that days/weeks/months

It’s a pretty efficient market

See this article (Suspect rates have climbed even further as the storage trade becomes more lucrative.


What are you going to do with the oil after one month?

No one needs oil right now so if you take physical delivery it’s going to be sitting there for longer than a month.

> selling the June contract at the same time

They would not be the one holding that particular bag.

if only arbitrage was that easy...

That's literally what futures contracts are for.

In a discussion about negative future prices no less. If buyers could refuse physical delivery, that's what they would be doing now, not selling at negative prices.

You still have to store the oil for a month. Which is expensive right now. Which is precisely why the May future is so cheap in the first place. I'm just rebutting that you will be stuck with the oil after June. Since they specifically said, they would sell a June contract immediately.

It just implies that any profit made by arbitraging June contract with May by taking physical delivery doesn't cover the storage costs (which is hard to believe at $22 difference but that's what market seems to indicate).

Just a guess, but maybe the consensus is that June is going to be the same (or worse) as May and they are going to have trouble unloading those contracts?

It may come to the point that you're paying some to take the contract.

You're selling the June contract right now. There will be nothing to unload. Whoever is holding your June contract when it expires will be the one left holding the bag (well, the barrels). That's the whole point of futures.

The problem is that you have to store the oil for a month which is pretty expensive right now.

But then the price in June should also be down.

It is down, it's just not down to $0.

Not yet it's not

Because storage is not free, and if that were such obvious profit, why would the guy writing you a May contract not do that themself, and write June instead?

By definition all open futures contracts have to either a) be Physically delivered Or b) be closed (remember that for futures contracts there is someone on each side (prepared to deliver 1,000 bbl and prepared to receive 1,000 bbl)

Now if you are a financial participant you need to close out your position as you are not in a position to either deliver/receive physical oil - so you need to essentially pay whatever it takes to close out the contract. In normal times there is plenty of storage and physical participants that are willing to provide liquidity as the contracts come to maturity. Now imagine you are a physical participant, and now space is limited/storage is expensive/ natural buyers aren’t buying (refiners) - you are not going to pay much to buy the oil of a financial participant who needs to sell the May contract to roll into June/July...

This isn't true for all contracts. For example, gold contracts are/can be settled for cash. I remember during the Great Recession talks about gold conspiracies and that gold futures contracts can be forced settled in cash instead of physical delivery. I'm not sure if that's true or if that's part of the futures contract, though.

The context here is oil - the benchmark contract and the one referenced in the article is the NYMEX CL (WTI/Cushing) it’s a deliverable contract.


> Did the longs think they had a place to put the oil on Friday but found out over the weekend they had no place to put it?

No, the Friday longs had a place to put it. But given it's late in the month, the people buying on Friday were probably finishing up their orders for the prompt month. Today, by comparison, there were no buyers, only sellers. Hence the drastic change in price. If there had been more buyers, the price would have been significantly higher (this is why next month's contract price is so much higher (in the $20's).

> Just seems like you would know what to do with the oil on Friday.

To be clear, they did. The people who had oil for sale and were holding out for a higher selling price who did not sell what they needed to sell last Friday are eating their shirts today. Their "greed" (relative, not necessarily Gordon Gecko style greed) caused them to lose a lot of money. Somebody will be firing oil traders this week. Not sure if that will make headlines. But somebody's book definitely blew up because they tried to get a higher price last week and ran into today's sale. Could be a hedge fund, could be an oil producer. But definitely look for this news soon.

> "What I don't understand is why the sudden move today?"

time is information, so closing out an option (like a short or a futures contract) prematurely tends to eat value on average.

however, in this case, the new information was so material and overwhelmingly bad, that you're probably correct that most should have closed out early and taken a smaller loss.

The May contract was still selling at $22 as of last Tuesday. I don't know much about oil markets but my base assumption would be that we would do this whole thing over again in 30 days unless something significant happens in consumption or production? When do the output cuts begin?

And can I somehow short these contracts a week before the next deadline?

I wouldn't touch this market with a 10 foot pole. It is absolutely ripe for government intervention and abuse. And if the fed does get involved they aren't going to be in there to bail out the short sellers.

If the same thing did happen again a month from now, you'd surely make a lot of profit. But it might not, and that's the risk.

I heard it wasn't funded, but can't the US strategic reserve take these contracts at a negative price and fill up on cheap oil?

It would seem like a prudent thing to do because it can then be used to restart the economy later and make a decent profit to pay off things like all these Covid checks.

They had plans to make a purchase to fill the reserve last month before the price went negative today, and they only had about 10 percent of the reserve free at that time: https://www.fool.com/investing/2020/03/13/trump-announces-ma...

I heard that was announced, but funding for that never materialized, so I'm not sure they got a chance to actually do that.

>I am guessing that traders who are still holding on to contracts and don’t have available storage have to unload contracts pretty quickly.

Good call! Now it’s about $5.30, and has dipped as low as $4.04. (Insert joke about “energy market not found”.)

Edit: wow. Just wow. Below $1 a barrel and kissed $0.01 at one point! That’s gotta be a record.

It's at -$30 as of 1:15 Mountain...

It’s not that there’s no storage capacity left, it’s that if you have May contracts you are going to pay a big premium to store oil in Cushing as capacity decreases in future months. The discount reflects the storage cost premium.

Any idea how much it takes to store oil in Cushing during normal times ?

This article from March 25 states that rates at Cushing more than doubled from 20 cents per barrel per month to 50 cents since February.


If storage rate is cents per barrel and barrels cost negative dollars per barrel, is sounds like storage is still very affordable.

If you have an old oil field that is at end of life, couldn't you pick this stuff up at $-40.00/barrel and pump it back into the empty reservoirs? I'm sure there is regulation against it, but if it was once a production reservoir, why couldn't you store it there? You would have to drill. You wouldn't have to do much at all.

You would need a suitable formation in terms of geological properties and then you'd need to drill and complete an injector and a producer well. Best case, you would probably lose half the stuff you're trying to store due to multiphase flow in reservoirs being a total drag. Worst case, the oil you're storing isn't compatible solubility-wise with the residual oil left in the reservoir, and you cause massive asphaltene precipitation and lose your entire storage well.

The fact that such precipitation is a known fact tells me it has been tried before.

Can't reply to semi-extrinsic, but it would seem to me, it'd be cheaper to just shut down the originating well.

I think it briefly went negative!

Let's add that to the list "Things I never thought I'd see but 2020 happened"

Not briefly, it’s still negative and hit -$40.

I think one of you are talking futures and the other physical oil. The prices are very disconnected at the moment.

It’s not full, it’s just getting closer to being full if demand remains low. The discount reflects a premium on storing unused oil at Cushing

Is delivery included in the price or is there an extra fee on top? How far can it be diverted?

Would they take delivery or would they pay the producers to dump it in the dirt or ocean? Oops into the ocean is cheap storage of useless oil.

It is hard to take delivery if you don't want to. These contracts have lots of safeguards to separate delivery from ownership.

There are lots of ways to have a contract, but one example of why this is done is if you have oil and on a slow boat. When the oil is loaded onto the boat the well owner wants to be paid, while the ship owner doesn't want to buy it, and the destination does not doesn't want to pay for it. This the ship will pay for the oil by selling a contract, the ship already knows where it is going, but they don't want to have ownership of the oil. By selling the contract on the same day they get their money back and don't lose money if oil goes down. Then they sell the oil on the other end and pay off the contract. Of course in the real world it is more complex but in general the destination is already known what isn't known is how much the oil will be worth when it gets there.

Note that I said hard to take delivery when you don't want it. Such things do happen despite safeguards. They are expensive mistakes for everyone (the ship delivering oil can't unload and so will miss the next dock while running for someplace that can take it), so there is a lot of checks in place but they can fail.

The producers aren't gonna dump it (at least not in the US) because that is a surefire way to not only have the EPA bend them over but to have the EPA bend them over with the blessing of public opinion. Nobody wants to have their company be associated with pictures of oil soaked wildlife.

If you're an oil producer, you don't need to "dump" oil in the surrounding environment. You can just pump it back into the oilfield you've been extracting it from.

This isn't really possible in the near term. You can't just hook up oil into your water injection system.

EPA isn’t enforcing right now.

This is obviously wrong. You cannot dump oil, and anyone found to be dumping will be prosecuted.



> The enforcement discretion described in this temporary policy do not apply to any criminal violations or conditions of probation in criminal sentences.


> This policy does not apply to imports.

They are relaxing REPORTING requirements - not giving a free pass to anyone dumping whatever they want. Obviously.

It's good to provide accurate information but please don't use allcaps for emphasis. This is in the site guidelines: https://news.ycombinator.com/newsguidelines.html.

This is obviously wrong. The EPA has explicitly stated they will not be enforcing regulation. Source: https://thehill.com/policy/energy-environment/489753-epa-sus...

From the memo that generated the news story you linked:

> IV. Accidental Releases Nothing in this temporary policy relieves any entity from the responsibility to prevent, respond to, or report accidental releases of oil, hazardous substances, hazardous chemicals, hazardous waste, and other pollutants, as required by federal law, or should be read as a willingness to exercise enforcement discretion in the wake of such a release.

If one wished to be nit-picky, one might note that the part you quote is explicitly about "accidental" releases, so arguably does not apply to the deliberate release that the originator of this thread branch was talking about. :-)

There is a separate note about criminal violations not facing “enforcement discretion”, which unless I'm mistaken covers pretty much any intentional release.



> The enforcement discretion described in this temporary policy do not apply to any criminal violations or conditions of probation in criminal sentences.


> This policy does not apply to imports.

They are relaxing REPORTING requirements - not giving a free pass to anyone dumping whatever they want. Obviously.

Doesn't matter when they enforce, no one's taking the risk of a change in administration.

What if Trump loses?

>Note that this is for the May contract, which closes tomorrow, and anyone left with a contract then will have to actually take delivery of the physical product.

Not really. Almost all contracts are cash settled.

> Not really. Almost all contracts are cash settled.

The parent comment is 100% correct. You're missing the nuance of how commodity futures trading works. Yes most are cash-settled but there is a date after which if you hold the contract you're promising to make or accept physical delivery. The commenter is saying we reach that point for the May oil contract tomorrow so anyone who wants to settle in cash has to do so by tomorrow.

Yes, this almost happened to me once when I was trading futures. My broker called me several times throughout the day and I couldn't take the call. When I finally did, he told me to roll my contract forward that day otherwise I would have to take delivery of 1000 bushels of corn.

My grandfather in Colorado did the opposite once in the 1970s. He needed some cattle, so he bought a small quantity of cattle futures of some form (I was too young when I heard the story to remember the details) from a broker/commodity trader in Chicago.

When the contract approached the settlement date, the broker called to ask him to sell. Trouble was, my grandfather just wanted cows, not cash. The broker was frustrated to no end.

Long story short, my grandfather got the cattle, as the contract required, but was asked by the broker never to do business with them again.

N.B. Don't do this unless you're interested in financial silliness, or if the futures are really badly mispriced. It is a lot easier, and you get to see the cattle first, if you buy through a local cattle auction.

I don't know. Somebody has to take delivery of the cattle, so why not the guy who wants some cattle?

People do take delivery on commodities obviously but you don't want to go through a speculator for this.

yeah, this just makes the whole business of futures trading seem like a scam where the people actually interested in the things being traded are pawns.

Marvelous story, thanks for sharing.

I'd love to hear from someone that got stuck with the 1000 bushels of corn (or similar). What do you do? How in the world do you manage that?

There's a story online thats floated around for a while about a guy that ended up with like 10 tonnes of coal this way. Was delivered via barge somewhere if I recall correctly.

Edit: finally found it: https://thedailywtf.com/articles/Special-Delivery

John C. Hull - Options, Futures, and Other Derivatives has details on an accidental cattle futures physical settlement.


There's a great Planet Money story on the Onion King.


You know, why didn’t Louis Sachar write a YA book about this?

That was an amazing episode

Worse it isn't 1000 bushes at your home it is at some transfer point several states away. If you are lucky it is an elevator that sends you a bill for storage and can unload them. If you are unlucky you need to get a truck (with a driver) there on short notice to get it out of there.

What if you just don't? You probably just get a larger bill.

Sure, but that can become a very big bill fast. Basically they can charge you (almost) whatever they want.

There are services you can call to help you out of this predicament. Obviously they charge a huge margin.

If I remember correctly, in contrast to WTI, you will get assigned a shipping/warehouse certificate for wheat/corn in a designated elevator somewhere. You'll have to pay the warehouse a daily carry cost but don't actually have to take it out of that warehouse (you can if you want to).

That reminds me of the GS Aluminum storage warehouse story.

True, but there will be checking to ensure that you want oil if you are not normally a destination for oil. Trying to deliver oil to someone without a loading dock will be a problem that hurts many people trying to correct.

100% false. Where are these facts coming from?

The specs for delivery are always very clear because price depends on where it needs to be delivered!

"Delivery shall be made free-on-board ("F.O.B.") at any pipeline or storage facility in Cushing, Oklahoma with pipeline access to Enterprise, Cushing storage or Enbridge, Cushing storage."

What does it mean to be "normally not a destination for oil" and who is doing this checking (do you realize the volume of oil that is traded monthly? The futures market being discussed here uses standardized contracts.

Not everyone is allowed to trade, there are rules if you don't have ability to accept oil they make it hard to get a contract that doesn't sell automatically. (not impossible, but a mistake guns up their processes so they have procedures to avoid it)

And you get the entire month of may to take delivery. If you become an accidental owner of crude oil tomorrow, you still have time to arrange a solution with someone that can take it. Financially, it doesn't sound like a good situation to be in though.

The CME Crude Oil Futures Contract is settled through delivery at Cushing, OK: https://www.cmegroup.com/trading/energy/crude-oil/light-swee...

Yes, but a very very low percentage of the contracts that expire result in delivery. Delivery is expensive. It's cheaper to get oil through a supplier.

That’s true but not really relevant here. if traders are holding on to any open contracts for May past tomorrow, then I believe they will have to take physical delivery.

Thus, traders who still have contracts open but cannot take physical delivery will have to close their positions out today or tomorrow, thus causing the dip we are seeing.

Are there market makers for those contracts? (So can they sell them at all?)

Of course there are market makers, but they aren't going to buy contracts if they can't deliver.

Okay, but isn't the point of designated market makers to always provide liquidity?

The percentage of contracts that result in delivery is only a marginal factor in this case. The fact that physical delivery exists makes it so that positions must be closed out; even if the May contract is down 44% on the day and you thought you would be clever buying the dip on Friday when oil couldn't possibly go lower.

If the pandemic lasts longer than 6 months, which is quite likely, many high-cost oil producers might not survive. Some would argue this could lead to shortage and a much higher price later on, but long-term oil demand could also be affected.

There might be some semi-permanent change in people's behaviors if the epidemic continues for many months. Many people will form a habit of doing more things at home/online: more takeouts, more online shopping, live/recorded video classes, virtual meetings, telehealth, etc. Better online services will also spring up to support the habits/practices.

Since online activities often save time, the new habits could become a new equilibrium: people/companies who adopt them will often have an economic advantage, influencing others to do the same. Thus, oil demand could be significantly diminished long-term as well.

If this comes to pass, I'm all for it. If we could take the demand we saw for oil, and put it into demand for high-speed Internet, we could see completely new, blue ocean markets.

Imagine a surgeon being able to control a robotic surgery tool from the comforts of his/her home, where you have to have extremely low-latency or guaranteed low-latency networks. Or imagine mecheng offices running simulation jobs in the cloud or an on-premises instead of each having a workstation, and being able to cluster that compute together. All these have been possible to some degree with existing technology, but now we have a paradigm shift and market acceptance that unlocks new business possibilities.

Nice to imagine, but the speed of light is too slow for a lot of low latency applications. After you allow the infrastructure some latency. A dedicated line might work, but without the network that is expensive.

>Nice to imagine, but the speed of light is too slow for a lot of low latency applications.

Is it? Looking around, it seems average visual reaction times (VRTs) are on the order of 250 ms, and even the fastest VRTs are well over 100 ms. A study looking specifically at medical students for auditory and visual reaction times ("A comparative study of visual and auditory reaction times on the basis of gender and physical activity levels of medical first year students" [1]) also seems to support those numbers in the medical context, and while experienced surgeons could be expected to be somewhat faster that paper also links to research indicating hard biological minimums:

>"Researches by Kemp show that an auditory stimulus takes only 8–10 ms to reach the brain, but on the other hand, a visual stimulus takes 20-40 ms."

If we want to be quite conservative and aim to keep latency to single digit ms, so sub-10ms, then the speed of light in standard fiber gives us an RTT limit of around 1300 miles. Going more conservative and assuming actual route having to essentially follow the legs of a right triangle, that still gives a radius of around 460 miles, with a set of reasonably conservative assumptions. That seems plenty good enough to cover an enormous amount of work-from-home (or at least work-from-different-location) when it comes to actual existing medical practices, where I doubt most doctors at hospitals live >460 miles away.

I would agree that there are real issues with the idea, but more in terms of the risks events like network disruptions than the speed of light.


1: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4456887/

I think you've mixed up your logic a bit. A slow visual reaction time means that surgeons are already reacting slower in the real world. Any latency added (!!) by a network further adds to the delay between surgeon reaction and real world stimulus.

You argued that when we compare the average VRT additional latency is not large. But you should have argued that there was enough buffer between average VRTs and the time needed for a surgeon to react to allow adding to average VRT.

i.e. If we imagine driving a car with a video camera, we don't really care about latency vs reaction time. We care whether latency + reaction < accident threshold.

>You argued that when we compare the average VRT additional latency is not large. But you should have argued that there was enough buffer between average VRTs and the time needed for a surgeon to react to allow adding to average VRT.

If you look at the paper I linked, it includes not just the mean but the standard deviation, which is on the order of 10-20ms. That means we are already by definition accepting that kind of variability regardless does it not? If +/- 10ms was critical, it'd imply we should be filtering for that already but it doesn't appear that's the case at all. Furthermore, hunting around for other research on the subject indicates far higher variability than that is also introduced by standard stress factors (lack of sleep, overload, distractions, etc). All of which are strongly present in existing medical practice as well. To the extent working remotely might reduce some of those it could in principle even effectively cancel out a 10ms penalty.

I stand by saying it's not at all clear that sub-10ms (or potentially even higher) would at all be the critical factor preventing remote work. Speed of light seems to be far less important then factors like total network disruption, robotics reliability, etc.

If last-mile network is too much, you could have a colocated office park / operations center next to a hospital with a dedicated high-speed network. Then each surgeon can schedule / manage a patient without having to walk to a different OR, change scrubs, or be exposed to contagious viruses.

Mecheng tasks could be async / queue-based and latency wouldn't matter too much.

Regardless, I think it's really important to keep your bias for action high during this period of time.

How common are robotic surgeries today? Are there benefits to having a machine do the cutting?

It’s common enough not to be a gimmick, but the real advantage is allowing surgery to be done by a limited pool of specialists that can cover wide areas.

So potentially the next step is specialists covering whole regions where the latency of fiber is still acceptable. Then as the equipment and training for telesurgery becomes more available/costs come down, you might see it used for smaller benefits of sterilization and travel/cleaning time within a hospital, even for more common/less specialized surgeries, and even if it's just a surgeon located at the same building or facility.

> mecheng offices running simulation jobs in the cloud or an on-premises instead of each having a workstation, and being able to cluster that compute together

that's totally a thing. worked on low-latency, high resolution remoting software for this purpose exactly. Buy a bunch of beefy servers and have scientists remote in from a laptop to run graphic intensive simulations, rather than buy a workstation for everyone.

I never understood why as a company you wouldn't prefer an on-premises computer cluster with some overhead and give employees thin clients, rather than give everybody MacBook Pros. Thin clients + servers make much more sense to me from a business perspective. They seem much easier to secure (just revoke some keys if you need to fire somebody), much easier to give everybody a reproducible dev env and avoid a lot of shenanigans, and saves money.

I wonder how much this costs: https://aws.amazon.com/outposts/

I worked for a financial company that ran a private cloud. They provided everyone with beefy workstations (16 physical cores, 32 GB of RAM). 3/4 of those resources were allocated to a VM that ran a custom compute platform that took jobs off of a queue. The explanation was simple. it was easier/cheaper to leverage the workstations than it was to build out the same compute in the datacenter. Granted, there was about a 5 degree temperature differential between under and over my desk, but I didn't complain. Kept me nice and toasty while I worked. This was +10 years ago. Each workstation had 2 Intel Xeons plus an nVidia Quadro for GPU work. Not sure if they've kept up with the tech, but I imagine they have. $10k/workstation wasn't a problem then, and from what I hear, it's probably not a problem now.

That's pretty cool. Sounds to me like a corporate SETI@home.

One recurring issue was the customer's network latency. A corporate vpn that bounces traffic around adds enough latency to make a really good solution feel comparable to using vnc. Reorganizing the network adds to the cost of the solutions.

I'm currently experiencing this. I live near my office and have sufficiently fast home internet. But connecting to the company network and attempting to work on a machine remotely is very painful. Working locally and commiting or accessing mail is still painful, but managable.

This also means depending on the internet. In the near future even isolated regional ISP outages would have bigget impacts on the economy

But a key part of this is simply how much Russia and Saudi Arabia want to pump. The whole purpose of the price war was to drive high cost producers out of business, but that combined with the severe drop in demand sent the price to oblivion.

Also, this could catalyze a shift to people doing more things remotely. But will that reduce oil consumption significantly? Don't forget about induced demand.

Right now, I can head down the freeway in what used to be rush hour without any traffic. If that persists for any length of time, people will start buy McMansions on former farmland until the freeways get packed back up again. They will perhaps order their products that will be produced with petroleum in China, and shipped on container ships, and trucked to Amazon facilities, and then delivered in gas-burning vans.

I think as long as the economy keeps growing oil consumption will keep growing, until something cheaper than oil comes along (either through technological breakthrough or subsidy).

Low traffic won't persist long-term, so most people with a job in a city will not move, unless they and their partner both get stable remote jobs.

Increased use for transporting goods is plausible, but generally it is more efficient than transporting people.

For most products, lower oil price might not contribute much to lowering its manufacturing cost, only for logistics, so it's unclear how much induced demand will apply to finished goods.

Transportation accounts for 69% of US petroleum consumption. https://www.eia.gov/energyexplained/oil-and-petroleum-produc...

Energy use (from all sources) per unit of GDP has slowly declined over the years.

Not to mention people that can't relocate. I, for one, cannot relocate on account of proximity to my step children (whom I've not seen for months due to quarantine). I'd be perfectly happy to work remotely from a site in Montana, given I had decent internet. But, because of my step children, I can't for at least another 7 years. Until all of my step kids are in college, at least, I'm stuck being in the Chicago area (otherwise, my wife would divorce me if she couldn't see her kids).

You'll also see the economy in the fourth largest city in the US - Houston - collapse. It's not just the large energy companies here, but the entire ecosystem of companies that support the energy industry here.

you can look to calgary and alberta for a prediction of what's in store for Houston in that case!

What happened there?

Are there any signs of this starting to happen given how low prices have gone?

I used to work in the industry. In the near term after a price drop, companies will still have projects they need to work on, and they have cash buffers on hand so they don't have to axe their whole staff after a bump in the road.

However, those cash reserves will quickly burn though. And the worst part is a lot of Houston's economy is buttressed by oilfield services companies, which make all their money off drilling new fracking wells.

Right now, it makes 0 sense to drill new fracking wells (-40 sense, to be more accurate), and they have big loans on billions of dollars worth of equipment.

It's gonna hurt soon, and it's going to hurt very bad.

Yes, most of the major oilfield service companies have started layoffs, and they're starting to ramp up. During the last oil downturn, 2015-16, it wasn't just the O&G upstream/downstream companies, it heavily impacted manufacturing (Houston is a big manufacturing center) companies, real-estate, etc.

We're already starting to see some of this, but it's also getting swept up with the pandemic lockdown, so it's hard to tell one apart from the other ATM, except that oilfield services are shedding employees quicker than other large firms, anecdotally.

Edit: it's worth noting that while the last downturn was heavily impactful on the energy, manufacturing, and real estate sectors, the recovery was pretty quick as the overall impact to the economy was about 1.6% down, and the rest of the overall economy was booming.

One of the popular indicators is number of listings and prices for F-250 class and bigger trucks, especially in places like West Texas and North Dakota.

Of course the automotive market in general is "non-typical" at the moment, so there are probably multiple interpretations to be made of whatever the market status is.

Though I'm from the US I currently live in Alberta, Canada, and can confirm.

I recall seeing CBC news articles about all of the cars and trucks left abandoned in the parking lots of the Edmonton and Calgary airports. All of the out-of-province workers just split once the pickings became poor. Cheap Tacoma trucks for a year or two, I regret not picking one up off of Kijiji (aka Canadian Craigslist) while I had the chance...

The best time to pick up a used truck/boat was to pay attention to the local plants where workers were going on strike (not even counting layoffs in times like these). I saw this extensively in the Pacific Northwest (Eastern Washington, Northern Idaho, Western Montana). Any time any of the big plants or mines striked was a good time to be buying used.

Currently over 20% of Houston office space sits empty (compare to Denver/Chicago ~13%). That’s because we haven’t even absorbed the empty office space left from the 2015 oil downturn. Office owners are now doing very favorable deals for new tenants as they brace for the coming bankruptcies, rent relief letters, and space reductions. This is likely to be painful for many more months in Houston, even if there is a quick recovery from COV-19.

> If the pandemic lasts longer than 6 months, which is quite likely, many high-cost oil producers might not survive. Some would argue this could lead to shortage and a much higher price later on, but long-term oil demand could also be affected.

Even if they all declared bankruptcy, their infrastructure would still be there. I'd imagine someone would buy it and bring it back online if/when prices recover.

Depreciation exists, and for mining investments, it's quite fast. Without extra investments, in 3 years most of that infrastructure won't be there anymore.

Fascinating. Is crude oil extra corrosive or is it something in the environment? Ocean salt water is highly corrosive but then what about equipment on land? Is there something that could be done to make an idled investment last longer?

Not so much corrosive as it is finite. A wheel will gather some oil, and then it's gone, and you need to dig another one.

I agree. It depends on long-term demand change, if any. New investors might be quite reluctant for a while regardless.

Factoring in as well impact to air travel (business & leisure), cruising and the likelihood that it will take some time for certain sectors of the world (Travel and Tourism comes to mind) years to reach back to 100% of 2019 levels even in a post vaccine world.

This not factoring in the structural changes to demand like electrification, and who knows what kind of energy transition stimulus money could be deployed in the coming quarters to kick start things back.

I am thinking it is of ever increasing likelihood that the “most oil consumed in a day ever” in human history could actually behind us.

This was at least originally about a strange oils price war between Saudi and Russia.

It just happened to coincide with the pandemic. Though I'd guess by now the pandemic adds fuel to the non-fire.

Not really , Chinese demand had dropped sharply in late January due civoid shutdowns . The original production cut discussions were influenced by that significantly.

Saudi/Russia likely did not anticipate a global lockdown and decided to get into a price war to keep their absolute revenue numbers stable albeit by increasing production under reduced prices ,that has of course backfired spectacularly.

If the whole situation wasn't so serious, it would be hilarious just how badly-timed the oil price war was!

the danger is some of these countries will see no reason to not start something with their neighbors or others

Western Canadian oil was -$0.15 today, i.e. you can be paid to take oil from the producers!


n.b. you'll still have to also pay the cost of piping the oil to somewhere that might want it...

Now trading at -$37.00.

That's right. Negative thirty seven dollars. Today: -54.67, -299.23%.


I wonder if that negative int broke a bunch of code in software around the world

Interesting math question: When we now start at a negative price tomorrow, what does a percentage change mean? Today, we have got losses >100%, unusual but obviously possible. But if price changes tomorrow from say $-10 to $10, is that again -200%? Does a change from $-10 to -$20 mean +100%?

(I obviously know percentage changes are not made for this)

Follow up question: If it had ended at zero dollars, then the next day jumps to $5, what's the percentage change?

Follow up answer, it's never zero dollars.

Hum... We can know this today with the power of Math!

But seriously, changing to -$10 to -$20 is a +100% change. It's multiplication, this is how it works. From -$10 to $10 would be a -200% change.

Obviously, only the mainstream news reports finance numbers as a percentage of change. Anybody else is only concerned about ROI.

Well, NYSE stops at certain drop intervals, so percentage does also occur professionally:


If I take 10$ to take some asset, and then later sell it for 20$ my return is 30$ and my investment was -10$, so my ROI comes out as -300% which betrays what's going on. So even with ROI, negative numbers throws a wrench in the machinerys typical assumptions.

I guess we'll find out tomorrow

Why is oil trading for $4 billi.. oh no

Son I sure hope thats not an Int. Its double, float or something else

To be doubly pedantic, it probably is an int in many places, to avoid rounding errors.

Correct. In finance it is the norm to store all currency amounts as int.

Let's hope it's a signed int, then.

I sure hope "something else". I'd really like to think it's fixed precision.

Often trading systems represent prices as integral values; using fixed point. It eliminates some problems with rounding.

Might be stored as an int in cents (or whatever the tick size is).

That's what I would do. Would never trust floating point numbers with something as important as currency.

Certainly broke the native stocks app on iOS. The graph only goes to zero, and the blue dot indicating the current price was rendered below the graph, in the news story section.

I work in finance. I literally ask this question of my boss today as I deal with market data. Didn't want a negative price to fuck with our systems (I've only been at the firm for 1 year, so not entirely comfortable with all our systems). Thankfully, we don't do much with futures, so we weren't too badly affected by this.

Also, we don't use int's. We use proper decimal types for currency values.

Arbitrary sized decimals? How do you deal with floating point math problems?

Certainly messed up the Yahoo finance graph:


Look at the red block below the graph, where it should have gone negative.

CME website itself crashed for over an hour.

Do you have a source on this? I don't see anything in the news.

Anecdotally, CME wouldn't load quotes or charts for Oil Futures for me for a while around 1pm.

That's US oil (WTI). Canadian oil is WCS.

I'm not at all familiar with the industry.

Is the deal here that someone said to someone with an oil well "brah, I'll pay you X to pick up N barrels of oil on the day that is Y", but the buyer doesn't actually have any place to store it, instead planned to sell the oil to others later? And Y-day is approaching fast and nobody wants the oil, so the middleman has to take a loss by trying to pay someone to pick up the oil, to avoid penalty fees from the oil well company I presume (as they'd have to shut down if they run out of storage I imagine).

Your intuition seems to be largely correct. With futures and a negative price, the seller is effectively paying you to take delivery.

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