INSIGHTi - Crude Oil Futures Prices Turn Negative - April 22, 2020

Oct 12, 2026

Insighti analyzes how WTI crude oil futures for the May immediate month turned negative on April 20, 2020, closing at -$37.62 per barrel. It explains contract mechanics, volume shifts to June, and why financial traders sold ahead of expiry. The report links the collapse to a supply-demand gap driven by COVID-19 demand losses and OPEC+ production disputes, then discusses storage constraints in Cushing and contango dynamics affecting price pressure.

LanguageEnglish

CategoryPresentations

FormatPDF

Pages3

Reading Time1 min

AccessFree to download

What Happened

How the May contract turned negative

Volume shifts and trader incentives

Why Did It Happen?

Supply-demand imbalance and OPEC+ failures

Storage limits at Cushing

What Does It Mean?

Market efficiency and contango outlook

June contract declines and future pressure

INSIGHTi Crude Oil Futures Prices Turn Negative April 22, 2020 What Happened? On April 20, 2020, the futures contract price for the immediate month (May) of West Texas Intermediate (WTI), the U.S. benchmark crude, went negative (see Figure 1) . The May futures contract price fell $55.90 during the day, to close at negative $37.62 per barrel. The futures price is a contract, usually monthly, for delivery of a certain amount of crude oil, on a specified date in the future, and at a particular location (Cushing, OK for WTI) . WTI crude oil futures contracts are traded on the New York Mercantile Exchange (NYMEX). According to data from the U.S. Energy Information Administration (EIA), this is the first time in history that WTI prices became negative. However, other commodity prices, including natural gas and propane, have previously traded negatively. The May futures contract for WTI expired on April 21. Trading volumes shifted away from the expiring immediate month to the next month (June) contract. Any contracts remaining at the end of the day for the May futures contract will be those that can make or take delivery at Cushing, OK. As shown on Figure 1, the biggest price decline corresponded with a jump in the contract volume. Traders looking to buy were incentivized by cheaper contracts. However, as prices continued to fall, contracting dropped. One reason this may have occurred is that financial traders—traders that cannot take physical delivery of crude oil—needed to sell before the contract expiration. Prices for other crude oil contract months also declined. The June contract for WTI dropped $4.60 to $20.43 per barrel at the close on April 20 from the previous close on April 17. Additionally, the Brent price, the main international crude oil benchmark price, for May closed at $23.35 per barrel, down $2.29; for June Brent fell to $25.57 per barrel, down $2.51. WTI futures contracts require the contract owner to take physical delivery of the crude oil soon after the futures contract expiry or face large fines, penalties, and fees. In contrast, Brent futures contracts settle financially not physically. Congressional Research Service [https://crsreports.congress.gov](https://crsreports.congress.gov)[ ](https://crsreports.congress.gov)IN11354 Figure 1. Hourly May Contract Volumes and WTI Futures Prices April 20-21, 2020 Source: NYMEX (New York Mercantile Exchange) via ICE (the Intercontinental Exchange). Notes: After 2:30 PM on April 21, the May futures contract stopped trading, and the June contract became the front month. Trading does not usually occur daily between 5 PM and 6 PM, so that the market can reset for the next day. Why Did It Happen? As a backdrop to the negative futures prices is a large gap between supply and demand for crude oil. The decline in demand for crude oil because ofCOVID-19 and economic distress is estimated by analysts tobe about 30% of global crude oil consumption or about 30 million barrels per day. The transportation sector drives demand for refined petroleum products (e.g., gasoline, diesel, jet fuel), which has dropped significantly. Meanwhile, crude oil supply has been increasing largely because of the failure of OPEC, Russia, and other crude oil producers (known collectively as OPEC+) to reach an agreement to cut production at a meeting on March 6. This triggered production increases by some oil producers, especially Saudi Arabia, which contributed to the precipitous drop in oil prices at the time. Subsequently, after President Trump ’s urging, OPEC and non-OPEC members announced, on April 12, an agreement to collectively reduce crude oil production by different amounts over time, starting with 9.7 million barrels per day on May 1, 2020. If successful, this may reduce pressure on oil prices. Otherwise, oversupply could continue, exacerbating petroleum storage and logistical limits, possibly further depressing prices. As available storage becomes more limited, futur

FAQs

What happened to WTI May crude oil futures on April 20, 2020?

The May WTI immediate-month futures contract price fell sharply and closed at negative $37.62 per barrel, after dropping $55.90 during the day.

Why did trading shift from the expiring May contract to June?

The May contract expired on April 21, and trading volumes moved to the next month (June). Remaining May positions largely related to delivery-capable contracts at Cushing.

How do storage constraints in Cushing affect WTI futures prices?

As storage becomes limited, owners discount prices to entice buyers. When Cushing access shrinks and capacity is effectively full, futures prices can keep falling unless another mitigating event occurs.

Oct 12, 2026

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