You know it’s tough times in the commodity world when you have to specify if a price is positive or negative…

The expiring May WTI crude oil futures contract collapsed and closed into deeply negative territory today, reflecting that the cost of storage for this physically-delivered contract exceeds its value in the spot market today. Crude oil is not like corn. You can’t just haul it to the elevator. And you certainly can’t dump it in a ground pile and throw a tarp over it. The EPA would come knocking.  There is only so much storage space available for crude oil, and demand is nearly non-existent given global shutdowns.

May (K20) crude settled today at NEGATIVE $37.63/bbl, down $55.90/bbl on the DAY.

June (M20) crude settled today at POSITIVE $20.43/bbl, down $4.60/bbl on the day.

Crude oil futures do not have a “full carry” rule like most grain contracts, in which the rules of the exchange fix a maximum storage charge on physical inventories that are delivered in fulfillment of a futures contract. Thus, today’s historic move in crude oil futures is the market searching for a value that incentivizes additional storage capacity to come online, and quickly.  It’s not always pretty to see a market doing what it needs to do to resolve a fundamental supply/demand constraint, but that is the function of commodity prices–to alter incentives to produce, consume, move supplies into storage, draw supplies out of storage, etc.

Despite all of the fanfare over today’s expiration of the May contract, in a few days the June contract will be the front-month and life will go on as normal, well maybe not normal, exactly, but above-zero for the most part…