Crude Oil Futures Priced at 1 Dollar... 93% Plunge One Day Before Expiration (Comprehensive)

May WTI Crashes Unprecedentedly One Day Before Expiration
Plunge Attributed to Lack of Oil Storage
June Contract Trades Around $22... Optical Illusion Also Occurs

[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] International oil prices plunged by over 90% during the session, falling to the $1 level.

On the 20th (local time) at the New York Mercantile Exchange (NYMEX), May delivery West Texas Intermediate (WTI) crude oil was trading at $1.23, down 93% as of 1:43 PM. During the session, it hit a low of $1.03. The highest price during the session was $17.85.

CNBC reported that the WTI price recorded the lowest level in history on this day.

However, it is considered difficult to evaluate international oil prices based solely on the May contract. Unlike the May contract, which is the nearest month, the June WTI contract is trading around $22, down 11%. The July contract is also trading around $27. This indicates that contracts closer to expiration are trading at lower prices. Brent crude, the international benchmark from the North Sea, is also trading around $26, down about 5%.

The May WTI futures contract expires tomorrow. Despite the trading focus already shifting to the June contract a day before expiration, the extreme volatility and plunge are unusual. Reports that oil inventories are overflowing and storage is becoming a problem appear to have influenced this.

The Wall Street Journal reported that due to the COVID-19 pandemic, supply is exceeding demand, making it difficult to find storage for crude oil, which has led to the record plunge in the nearest month WTI price.

Lead economist Reed Lanson of market research firm Kepler said, "If storage can be found, it is an opportunity to make a lot of money." The Wall Street Journal introduced that many investors are already renting large oil tankers to store crude oil.

Regarding the extreme volatility of May WTI, Steven Ines, investment strategist at Axi Group, said, "The combination of expiration effects and weak demand is causing extreme turmoil in the May WTI price."

Helim Croft, commodity investment strategist at RBS Capital, evaluated, "There is an oversupply of crude oil. Refineries do not need crude oil to the extent that it is overflowing. No measures have been introduced to calm the oil market."

The crude oil price in the futures market is also affecting the spot market. The Wall Street Journal reported that crude oil trading below $10 has already appeared in the U.S. spot market.

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