| Most would agree that oil prices are "low" everywhere, but there is currently a substantial gap between near-term contract prices for WTI (US) and Brent. Aside from some differences in the specifications of the crude itself, the core difference between these contracts and the key driver for the massive price drop is the delivery location. Brent contracts are the global benchmark, and delivery can take place in a variety of locations. WTI means West Texas Intermediate, and the delivery location for futures is in Cushing, Oklahoma: "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. Delivery shall be made in accordance with all applicable Federal executive orders and all applicable Federal, State and local laws and regulations..."[1] Prices therefore reflect the demand and storage capacity/cost there, as well as the cost of sending it somewhere else. The contract that had the massive drop into negative value was WTI for delivery in May. The owners of those contracts when trading terminates are responsible for taking delivery of that oil in the specified location at the agreed price in May. The negative price reflects the fact that noone wants that oil in that location at that time, even for free. At the low point, buyers were demanding >$35/barrel to take it. For reference June WTI contracts are currently still $21.43. [1] https://www.cmegroup.com/trading/energy/crude-oil/light-swee... |