Washington, D.C. — Staff of the Commodity Futures Trading Commission’s Division of Market Oversight (DMO) and Office of the Chief Economist (OCE) today published an interim report regarding the circumstances leading up to, on, and around April 20, 2020 for the West Texas Intermediate Light Sweet Crude Oil futures contract (WTI Contract) traded on the New York Mercantile Exchange (NYMEX). 

The report provides background, context, and observations focusing on the WTI Contract’s May 2020 expiration (May Contract), the price of which fell from $17.73 per barrel to settle at -$37.63 per barrel on April 20, the day before the contract expired. The May Contract’s negative prices observed during the April 20 trading session and at settlement were the first time the WTI Contract traded at a negative price since being listed for trading 37 years ago.

"This report presents important facts our career market oversight professionals and economists are able to share publicly and includes detailed analysis using non-public information and multiple sources of data," said Chairman Heath P. Tarbert. "While some may have hoped for a more definitive analysis, we simply cannot provide that at this time—just as we cannot confirm or deny media reports of investigations tied to these events. Nevertheless, we believe it is in the public interest to be transparent with the substantial information we do have and can share at this point in time. I commend the DMO and OCE staff who led the production of this report for their dedication and professionalism."

The report includes: (i) an executive summary; (ii) background on the WTI Contract; (iii) a discussion of fundamental factors that impacted supply and demand for domestic crude oil; and (iv) an analysis of trading activity in the WTI contract leading up to, on, and around April 20. Further data, information, and analysis may affect the observations presented in this report. 

While a root cause analysis evaluating individual price movements was beyond the scope of this report, some fundamental factors that coincided with, and may have influenced, the May Contract’s trading and settlement at negative prices during the April 20 trading session discussed in the interim report include:

• An already oversupplied global crude oil market at the beginning of 2020;
• An unprecedented reduction in demand caused by COVID-19; and
• Concerns about availability of global crude oil storage.

In addition, a number of technical factors related to market structure were also present during the April 20 trading session, including: 

• Open interest (OI) in the May Contract was much higher than usual in the weeks prior to the expiration of the May Contract, and specifically at the start of the April 20 trading session;
• The majority of traders holding positions in the May Contract had traded out of their positions prior to April 20;
• OI was high entering the April 20 trading session, but the number of reportable traders holding positions at expiry on April 21 was consistent with prior contract months; 
• Limit order book activity related to multiple products showed a decrease in liquidity in the May Contract, with the decrease starting well before April 20; and
• The speed and magnitude of the price moves observed on April 20 in the May Contract, particularly between 1:00 p.m. and the end-of-day settlement at 2:30 p.m. Eastern Time, were exceptional despite the triggering of exchange-based control mechanisms designed to impose pauses in the event of rapid or large price moves. 

The staff report is available in its entirety here.