Power Line: The real reason crude oil went negative, top oil stock picks, and why the clean-energy transition endures
awash with oil that nobody wantsPeople who owned contracts for oil were paying buyers to take their oil, sending the price into negative double-digits on Monday. Usually, when people refer to the price of oil they're talking about futures contracts — meaning, the price of oil that will be delivered at a later date.Those contracts expired on Tuesday. So on Monday, traders — who are not equipped to take physical deliveries — were rushing to sell them to buyers who have booked storage.
But with storage at near full capacity and little demand, few buyers wanted those delivered. Traders instead had to pay them to take the oil.WTI is the benchmark for US crude oil, making it the most important futures contract to watch in the US. by about 70% since the start of the yearA big difference between the two benchmarks is proximity to markets. WTI oil is delivered to Cushing, Oklahoma — a city that is very much landlocked, unlike Brent.
Storage in Cushing is expected to reach capacity by mid-June, according to UBS, and it's not as easy to send the oil elsewhere. That puts more downward pressure on the price. From one perspective, no one wins. When the oil industry tanks, it drags down the rest of the economy. But some parties end up on top.
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