1/ Story time! How did oil prices plunged below $0 per barrel? Well, it has something to with the way oil is traded.

What actually fell below $0 was US crude oil futures. A futures contract is basically a promise to buy or sell something at a specific price at a future date.

2/ Some futures are "cash settled" which means the seller will not deliver actual stuff when the time comes. The parties just settle the contract's gain or loss with cash.

But, most commodities (including oil) involves "physical delivery" as in delivery of the actual product.

3/ If you buy oil futures and don't sell it to someone else before delivery date, a tanker full of oil will show up somewhere waiting for you to collect the oil.

This is where things get sticky. US already has gazillions barrels of oil and there aren't enough storage space.

4/ So what will you do with the tankers full of oil waiting at the port? One way is to pay someone else to take delivery of the oil.

Yep. Buyers are actually paying people to take delivery of oil in US... and that's roughly how you ended up with negative oil prices.

5/ One important thing to note is that this phenomenon is confined to US for now.

Brent, which is the global benchmark for crude oil, is still trading at positive prices because of available storage space outside US.

6/6 Brent is delivered differently. Rather than through pipeline hub (as in US), Brent is mostly shipped around the world.

So, all traders need to do with excess oil is just to send the oil where the demand is. End of story time!