PT  - JOURNAL ARTICLE
AU  - Lingjie Ma
TI  - Negative WTI Price: What Really Happened and What Can We Learn?
AID  - 10.3905/jod.2021.1.141
DP  - 2022 Feb 28
TA  - The Journal of Derivatives
PG  - 9--29
VI  - 29
IP  - 3
4099  - https://pm-research.com/content/29/3/9.short
4100  - https://pm-research.com/content/29/3/9.full
AB  - The price of West Texas Intermediate futures contracts fell into the negative on April 20, 2020. In this article, I investigate underlying factors that contributed to the negative price and propose rule changes. I begin with the causes: first, because of the COVID-19 pandemic and an oil price war, an oil oversupply and storage shortage put significant downward pressure on oil prices; second, CME Group made policy changes in early April allowing negative prices; third, heterogeneous trading activities of retail investors and speculators contributed to the negative price on April 20. To improve market efficiency and fairness for market participants, I propose rule changes, such as more advance notice for market rule changes, robust alternatives for settlement price construction, and appropriate limit on trade-at-settlement contracts.