Day Traders Are a New Wrinkle in the Negative Oil Price Mystery
It wasn’t just Interactive Brokers: Customers of ETrade and TD Ameritrade were shut out when the futures contract price fell below zero.
Photographer: Pitinan Piyavatin/Alamy Stock Photo
Add another possible cause for oil prices going negative for the first time ever in April: the day-trader effect.
A month after West Texas Intermediate crude oil futures settled at negative $37.63 on April 20, few conclusions have been reached as to what caused the crash. At first, people pointed to the outsize influence the enormous United States Oil Fund LP plays in crude. But it turns out the exchange-traded fund was out of the May contract at the time it breached zero. The shortage of available space to store oil at the key hub in Cushing, Okla., was another likely culprit, yet the market had known about that problem for weeks. Oil watchers then fingered the late selling by the Bank of China’s Crude Oil Treasure fund, but still, no definitive explanation has emerged.