/biz/ - Business & Finance

Dear Tankerbros,

I did my fucking research and I'm going to share with you what I know for a fact, only because I adore you tards.

COPY/PASTE this:

The problem with the WTI crude oil contracts lies in the following mechanism: 99% percent of WTI contracts end with no delivery, because they are held by paper traders (speculators, ETFs, chinkbank, etc). If you check what happened in April with the May contracts you'll see that in the end, more or less 2.5k contracts delivered ergo 2.5M oil changed hands. The reason the price of this contract went negative and probably will go negative again is that there were LESS real buyers (who are able to store the fkn oil) than real sellers (who want to deliver it). In other words, on the last days when the SHTF it became a very real scenario that a bunch of paper traders who have no means of accepting the delivery WERE MATCHED with suppliers who wanted to deliver by all means (no capacity and over-production).

The June WTI will go negative before expiration if the following conditions are met:
1. There are fewer buyers who really want to take the oil. (probably, as the capacities are near full)
2. There are more sellers who really want to deliver the oil. (probably, because of over-production)

How to check that we are on the way to this?
Look at the open interest (unclosed contracts) data here:

https://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude_quotes_volume_voi.html#tradeDate=20200514

If the open interest will be substantially higher than 3500 (previous months volume + the gubment buying 1000 contracts) during the last trading day (19th) then it's game over, it WILL go to negative.

Obviously, the jump to negative can happen earlier because of anticipation.

Pic attached shows the open interest for 05.14.

Hope this clarifies things and if I'm wrong, please enlighten me.