A resumption of the falling oil market that brought the New York Mercantile Exchange gross contract now expired into negative price territory on the eve of its expiration last month cannot be excluded, the Commodity Futures Trading Commission warned on Wednesday, urging the futures industry be prepared.
In a staff advisory, the regulator reminded stock exchanges, futures brokers and clearing houses “that they should be prepared for the possibility that certain contracts continue to experience extreme market volatility, low liquidity and possibly negative prices ”.
The rare warning comes after May’s West Texas Intermediate oil contract made history on April 20, with prices falling below zero and settling in negative territory. This decision came in the context of thin transactions when holders of long positions hastened to leave due to a lack of storage available to deliver crude oil one day before the expiration of the contract.
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In a footnote, the agency said the notice was not intended to suggest that specific markets or contracts will encounter fundamental or technical problems.
The WTI contract of June
expires May 19. Oil futures have gained ground since the end of April, and concerns over storage have eased somewhat. Oil stocks in Cushing, Oklahoma, Nymex’s futures delivery center, fell 3 million barrels last week, the Energy Information Administration reported Wednesday to 62.4 million barrels. The working storage capacity at Cushing is approximately 76 million barrels.
CME Group Inc. chief executive Terry Duffy told CNBC in the days following the May contract’s fall into negative territory that the stock market and regulators had been prepared for this eventuality and that the “market ultimately worked perfectly ”.
Interactive Brokers Group Inc.
On Monday, he said he would recognize a revised loss of $ 104 million as a result of the negative settlement, as he made margin settlements with clearing houses and decided to compensate some customers for the losses.
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