So much fucking garbage going around all day today about the front month CL expiry. Trying to find one fucking article that has a clue. No luck. Anyone who’s not lazy posting today’s May chart, which, granted, is unprecedented and freaky, no matter how you look it at

I’ve maintained all day that there is little here beyond entertainment value, although I do have questions around curbs and structure that we’ll be able to figure out at a later time

But let’s look at the numbers and some narrative that we actually see coming out of a few biz news outlets in an attempt to explain to us all what’s really going on

What we are being told is we are running out of storage because... well... shit ... no one is driving or flying, while oil is flowing out of the ground and there is nowhere to put it. Kinda makes sense, right?

Now... did the oil mkt go to bed Fri thinking there was plenty of storage & then woke up today and realized “oh shit, no one is driving and flying and we can only store this much of this black gold and we don’t know what to do with the rest”. Cause this is what I’m told happened

Ok. Let’s say the above is true and people who trade oil are complete fucking morons and incompetent to boot and love to lose money too. Surely there gotta be data to back this hypothis up. We got data for everything, right?

So what is the data? So we know that when outsized moves occur in a liquid product volume typically increase. What also happens is where there’s not enough liquidity, prices tend to gyrate wildly. So what happened today on this epic historic day in the oil pits?

Well, aside from price, not much actually. There was all of 150k-ish contracts trading today. That’s ~ 20% of typical front month daily volume. And that’s normal as the contract is gone tomorrow morning. Most people have already rolled & there’s simply no reason to stick around

But hang on. Where did this volume trade most day? Turns out over 90% traded above $0, with a big share substantially above $0. That leaves you with 15k contracts that grabbed the world’s attention taking price from $0 to -$40. 15k measly contracts.

Now... what is 15k contracts? On a typical day it ain’t shit. On last day of trading with limited liquidity it’s still not that much but as we saw today, can generate some headlines

But let’s return to the narrative of running out of storage. Were these 15k contracts or any of today’s volume actually going to be physically settled? Fuck no. You telling me there is a guy who sold maybe 10 lot & is paying $40 so he can deliver 10k barrels to Cushing? Gtfoh

Wti, unlike Brent, is physically settled. But only a smidge actually gets settled that way and most volume is settled in cash. I’m gonna say 99% is cash settled. So believe you me that on the last day you are not initiating a trade to take or provide delivery for the most part

So while the storage problem is real it is real for the physical market. Not paper. What happened today had nothing to do with corona or storage or OPEC or whatever the fuck. Remember, storage is not full now. If you worried about delivering your product you can start May 1.

There’ll still be room in the first few weeks of May. And after that plenty of floating storage still. So while the storage narrative is sorta intuitive and easy to explain and for people to buy into, it doesn’t really stand all that well

So what the fuck happened? As of now, we can only speculate. There are some theories. Just think for a second what it would take to sell oil in low single digits, let alone -$40. This is how faces get ripped off. Except the guys who did it today likely made a fortune.

So the true answer right now is we don’t fucking know exactly what happened. But since we can’t accept this answer, we come up with theories, like storage, that make us feel like we understand what’s going on, when all we do is perpetuate our own stupidity.

My theory is there was likely a situation that allowed someone to make a play for negative price and make bank. We may or may not find out what happened. But that’s all there is to it for now. Sorry this story doesn’t have a dramatic ending but neither did the Sopranos