Black Monday Redux, Negative Oil Futures Retrospective

8 Pages Posted: 30 Mar 2021

Date Written: March 4, 2021


This paper examines the historic drop in West Texas Intermediate (“WTI”) oil futures contracts that occurred on April 20, 2020 as a result of significant events occurring at that time. While price movements around this time were jarring and raised the specter of ‘broken markets’, in reality, the futures contracts did what they were supposed to do, including the potential for negative pricing, and the physical oil markets took the price swings in stride and adapted accordingly. On the other hand, a conflux of low trading liquidity on the day and relative position of remaining market participants, some of whom were not extremely well-versed in the underlying intentions and terms of crude futures contracts, especially as it relates to taking physical delivery, temporarily increased volatility of the May20 WTI crude futures contract on the day prior to settlement. Given the ongoing democratization of investing, the events that played out illustrate the concept of ‘caveat emptor’ and the need for pro-active education in addition to reasonable safeguards in investment products and platforms.

Keywords: commodity futures; crude futures; marginal pricing; physical trading; Black Monday

JEL Classification: G00

Suggested Citation

Chiu, James, Black Monday Redux, Negative Oil Futures Retrospective (March 4, 2021). Available at SSRN: or

James Chiu (Contact Author)

Pilot Flying J ( email )

Knoxville, TN

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