WTI crude oil futures markets experienced the unprecedented phenomenon of negative prices on April 20, 2020. Several energy market pundits attributed the event to the large United States oil exchange-traded fund (“USO”) due to the rolling of positions out of the May 2020 contract (CLK20) before the contract’s maturity on April 21, 2020. The authors show empirically that USO flows have not influenced the flat price of WTI futures in general, nor of the CLK20 contract in particular.
A blend of macroeconomic/geopolitical conditions, including the sudden demand plunge associated with COVID-19 pandemic-control measures and various supply spikes due to Russia-Saudi Arabia tensions, contributed to a contangoed WTI futures curve that attracted cash-and-carry (C&C) arbitrage, sharply increasing the inventories at Cushing, and feeding into a super-contango, as concerns on storage capacity loomed. That said, a full understanding of the negative WTI price phenomenon of April 20, 2020 will require a formal examination of market microstructure issues on that day.