Welcome back to trading WTI - hope you didn't get damaged yesterday during the trading session.
This morning you are now looking at a USOIL price of $20+. Possibly a 237,000% increase from yesterday.
What just happened?
When you look at symbols for commodities such as USOIL or UKOIL, what you are seeing is a chart that is following the most current futures contract. You don't need to worry about what the next contract symbol in the series is, it automatically rolls over for your viewing pleasure. You aren't using /CLK2020, /CLM2020 or /CLF2022 (May 2020, June 2020 and January 2022).
Yesterday was the last trade day for May 2020 contracts.
What the world witnessed was historical. However, a basic explanation of the situation follows.
With the futures contracts you have a physical item that you gain/lose. Unlike stock options in which you don't need to exercise at expiration. In futures, you agreed to purchase/sell and deliver.
If you are long, you buy barrels of oil and if you are short, you sell them. Majority of the time, if you actually were to take physical delivery, you would use a storage site to hold your oil until you could find a buyer. But you would need to purchase pipeline time and such to get it there.
Now - what do you do when storage facilities in the United States are nearly full? You aren't an oil company/airlines that has your own storage, you are just an investor/hedge-fund/etc? You get rid of any position that forces you to buy oil - regardless of the cost - you don't want to try to solve a storage problem on a physical item.
At that was yesterday.
The 237,000% jump you see today is the June 2020 contract now being the current contract which is set to expire on May 14, 2020.
But the "May" contract expired and it is April. That is correct, the month on current contract is the delivery month. So all the contracts that expired yesterday (4/20/2020) must be delivered in the month of May.
Hope this helps remove some confusion - you just witnessed a once in a lifetime event. However if the consumption/storage situation is not resolved - We might watch this again on May 13, 2020.
-PriceProphet
This morning you are now looking at a USOIL price of $20+. Possibly a 237,000% increase from yesterday.
What just happened?
When you look at symbols for commodities such as USOIL or UKOIL, what you are seeing is a chart that is following the most current futures contract. You don't need to worry about what the next contract symbol in the series is, it automatically rolls over for your viewing pleasure. You aren't using /CLK2020, /CLM2020 or /CLF2022 (May 2020, June 2020 and January 2022).
Yesterday was the last trade day for May 2020 contracts.
What the world witnessed was historical. However, a basic explanation of the situation follows.
With the futures contracts you have a physical item that you gain/lose. Unlike stock options in which you don't need to exercise at expiration. In futures, you agreed to purchase/sell and deliver.
If you are long, you buy barrels of oil and if you are short, you sell them. Majority of the time, if you actually were to take physical delivery, you would use a storage site to hold your oil until you could find a buyer. But you would need to purchase pipeline time and such to get it there.
Now - what do you do when storage facilities in the United States are nearly full? You aren't an oil company/airlines that has your own storage, you are just an investor/hedge-fund/etc? You get rid of any position that forces you to buy oil - regardless of the cost - you don't want to try to solve a storage problem on a physical item.
At that was yesterday.
The 237,000% jump you see today is the June 2020 contract now being the current contract which is set to expire on May 14, 2020.
But the "May" contract expired and it is April. That is correct, the month on current contract is the delivery month. So all the contracts that expired yesterday (4/20/2020) must be delivered in the month of May.
Hope this helps remove some confusion - you just witnessed a once in a lifetime event. However if the consumption/storage situation is not resolved - We might watch this again on May 13, 2020.
-PriceProphet