For one afternoon a barrel of oil was worth minus thirty-seven dollars — not because demand vanished, but because there was nowhere to put it.
What happened
March–April 2020 — pandemic lockdowns collapse fuel demand while production keeps flowing. Crude accumulates faster than it can be consumed.
Storage fills — WTI futures deliver physically at Cushing, Oklahoma, a landlocked hub with finite tank capacity. By mid-April, spare capacity is effectively spoken for.
20 April 2020 — the May contract expires the next day. Holders who cannot take delivery must sell, and the buyers who could store it are already full.
The settlement — the contract settles at −$37.63: sellers paying buyers to take the obligation away. The June contract, still weeks from delivery, trades above $20 the same day.
The mechanism
The expiring contract collapses through zero while the next month barely moves. The gap is the price of a physical constraint, not a change in the world's demand for oil.
Futures converge to physical reality at expiry. Away from delivery, a futures price is a financial opinion; at delivery it is a logistics problem with a deadline.
No storage means no arbitrage floor. The usual "buy cheap, store it, sell forward" trade that stops prices from falling too far requires somewhere to put the barrels.
Financial holders had no delivery capability — index products and retail-facing funds had to be out before expiry, and everyone knew the deadline.
The negative price was brief and local: one contract, one delivery point, one afternoon. It was not the price of oil in the world.
What it teaches
Know the delivery mechanics of anything you hold — including the date by which you must be out (see commodities).
Storability determines whether a curve has an anchor. Unstorable markets like electricity live with this permanently.
A futures index is not spot exposure. The roll is where the difference accumulates, and at expiry it can become abrupt.
"The price cannot go below zero" is a statement about assets, not about obligations. A contract to receive something you cannot store is a liability.