Just how perverted have the markets become during this Covid-19 pandemic.

West Texas (WTI) crude oil futures for May delivery fell more than 300%  on Monday to trade at negative roughly $40 a barrel. Oil futures, which have never traded below zero, traded Tuesday morning at negative $1.50, with an overnight gain of $36, or 96%.

Now of course this was a massive short squeeze in the crude trading pits, since Brent crude futures (Europe’s crude commodity) are trading at $21.80/barrel. Also the June futures contract for WTI is trading around $21 Tuesday morning.

The May crude futures contract expires Tuesday, so many holders of this paper attempted to rollover to the June contract. This is usually a nonevent. However, there were no buyers of this contract, which requires taking physical delivery. As the pandemic lock down continues gas demand has cratered meaning there is no excess capacity to store the oil in Cushing, Oklahoma where the settlement occurs.

Surely the fallout of this pandemic petrol panic will rear its head as some hedge funds were caught in the slippery slope yesterday. Initially it appears the damage will be contained to small trading operators, but we will see.