In the past week, the price of the WTI cash roll turned negative, falling to $(0.10)/bbl (red dashed circle in chart below), suggestive of weak immediate demand for crude oil that is delivered to the Cushing, OK hub. As discussed in RBN’s TradeView report, this is the third time in just over a year that the cash roll has drifted into negative territory with prior occurrences taking place in early January 2024 (pink dashed oval) and mid-November 2024 (black dashed oval). The cash roll is an often used marker to determine the price that market players are willing to pay for delivery of a barrel of crude oil now (immediate delivery) as opposed to waiting for delivery at a later date as is the case for a futures contract. With the cash roll trading at $(0.10)/bbl, this means that a buyer of crude oil for immediate delivery is willing to pay ten cents less than the prompt month NYMEX-CME futures contract (i.e. ten cents less than the February 14th March contract settle price of $74.74/bbl = $74.64/bbl).
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Future(s) Games, Part 2 - The Baffling Impact of Oil Futures on Physical Contract Prices - CMA Roll Adjust and P-Plus
On April 20, that fateful day in crude oil markets when the CME May contract for WTI at Cushing collapsed to negative $37.63/bbl, the number of contracts involved in the chaos was relatively small. So you might think that most producers sat on the sidelines, watching Wall Street paper traders writhe in stunning financial pain. But not so. Almost all producers saw their crude prices that day crashing in exactly the same magnitude. That’s because the daily price of the CME WTI contract is part of the formula pricing used in a very large portion of crude oil contracts in U.S. markets, both directly and indirectly. There are two formula mechanisms that are commonly used in crude oil sale/purchase contracts that are responsible for that linkage: the CMA and WTI P-Plus. These arcane pricing mechanisms are complicated, but in order to understand U.S. crude markets, it is critically important to appreciate how they work. Today, we continue our deep dive into crude oil contract pricing mechanisms.
Price Differential for Bakken Light Sweet Crude into Cushing Hits 4 1/2-Half-Year Low
Give and Take - How the Forward Curve Influences Storage Volumes at the Critical Cushing Oil Hub
The small town of Cushing, OK, occupies a central place in the U.S. crude oil market thanks to its hundreds of storage tanks and numerous pipeline connections. And while it might seem far removed from the factors that influence the global crude market, what happens elsewhere directly impacts the storage volumes at Cushing. In today’s RBN blog, we review the critical role that Cushing plays in crude oil storage, show how the forward curve can influence inventories, and look at what might be behind the recent uptick in storage levels, which followed a four-month slide.
