CFTC Staff Publishes Interim Report on NYMEX WTI Crude Contract Trading on April 20, 2020

December 4th | 2020

The CFTC Staff recently published an interim report regarding the circumstances around the unusual trading of West Texas Intermediate Light Sweet Crude Oil futures contract (WTI) that occurred on NYMEX on and around April 20, 2020. Recall that around this time the price for May 2020 delivery of WTI crude dropped precipitously and ended up trading at negative prices for a brief period. WTI also disconnected from its typical relationship with Brent and petroleum product prices. While the report does not purport to explain individual price moves, the report does cite three fundamental factors that could have had an influence:

  • 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.

The CFTC’s commissioners’ comments suggest that there may be additional rulemaking required to prevent these kinds of incidents in the future. Indeed, Commissioner Rostin Behnam mentions there may be impact to the CFTC’s proposal regarding Electronic Trading Risk Principles, which are slated to be considered by the CFTC this month. Commissioner Dan M. Berkovitz took a more critical view of the report, which may suggest that more investigation into the events leading up to April 20 may also be on the Commission’s agenda for 2021.

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