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Market Watch Weekly | April 24th, 2020 | I Drink Your Milkshake! I Drink it Up!

Erik Dekker - Apr 24, 2020
North American markets were mixed on the week with Canada’s S&P TSX outperforming out its counterparts to the south. The TSX has put together a string of four consecutive weekly gains – the longest such stretch in several months.

North American markets were mixed on the week with Canada’s S&P TSX outperforming out its counterparts to the south. The TSX has put together a string of four consecutive weekly gains – the longest such stretch in several months. Aside from COVID-19, the talk on Wall Street was centered around something that was long considered impossible: Negative Oil Prices... And by a lot.

 

On Monday, the WTI futures contract for May expiration traded at a negative price for the first time ever, closing the day at -$37/barrel. Without getting too technical, a single futures contract is a legal contract to accept 1,000 barrels of oil. Meaning that as of Monday close, an owner of 1, yes 1, futures contract was potentially obligated to accept 1,000 barrels of oil and receive US$37,000. Don’t worry, you didn’t miss out on the trade of a lifetime. When the contract expired on Tuesday it was back in positive territory, closing at $10.01. People tend to forget that the so-called WTI "paper" market – i.e., futures – is actually a market in which an owner must accept physical delivery of oil at Cushing, Oklahoma. If you are left long when the contract expires you will have to stand for physical delivery in Oklahoma. If you are short, you must deliver physical barrels, again, in Oklahoma. These are binding, legal contracts.

 

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