U.S. WTI crude oil May negative prices “anomaly”: analysts

U.S. crude oil prices plunged into negative territory on Monday (Apr 20), a reflection of demand due to the COVID-19 pandemic.

Analysts caution the West Texas Intermediate (WTI) crude drop for May delivery, of more than 100% and finally settled at $37.63 per barrel, is not a true reality.

S&P Global said on Monday the WTI settled in negative territory as a lack of storage capacity forced traders to exit positions ahead of Apr 21’s contract expiration.

The selloff is "all related to the expiration," said S&P Global Platts Analytics senior consultant Sergio Baron on Monday. "WTI is deliverable via exchange, so a long futures contract with no space doesn't have other alternative to sell."

Analysts at Moody’s concur.

Oil and gas Managing Director Steve Wood explained that in a normal market, contracts typically roll over and rarely settle physically. Amid the pandemic, there is limited storage capacity so there is a mismatch between the “paper” market and the “physical” market," he said.  

"Once the May contract rolls off the June contract becomes the front month contract that is the most widely quoted. June is $21 and July is $27, which shows that the May contract is the anomaly," he added. 

"Furthermore, the current Brent contract is the June contract and is down today at  $26 but not like the May WTI contract."

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