People left holding that contract when trading ceased last Tuesday would have had to take delivery of the oil at the Cushing storage hub in Oklahoma. But with the world awash in oil, there was nowhere for them to store it. So they had to get rid of that obligation, at almost any price. (File pic: Oil storage at Cushing, Oklahoma.)
Crude oil’s collapse into negative prices last Monday was a clear warning of just how scarce storage space for oil is getting. Prices below zero are the market’s way of telling producers to stop pumping, now.
Dismissing the historic move in the May contract for West Texas Intermediate crude as “more of a financial thing than an oil situation, ” as US President Donald Trump did, misses the point.
People left holding that contract when trading ceased last Tuesday would have had to take delivery of the oil at the Cushing storage hub in Oklahoma. But with the world awash in oil, there was nowhere for them to store it. So they had to get rid of that obligation, at almost any price.
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