North American crude oil prices are closely, but not perfectly, connected (5/20/2020)

The decline on April 20, 2020 in the price of the front-month New York Mercantile Exchange (NYMEX) West Texas Intermediate (WTI) futures contract was the largest and swiftest on record. Front-month WTI prices dropped as low as -$40.32 per barrel (b) on April 20 during intraday trading before closing at -$37.63/b. Prices have since recovered, with NYMEX front-month WTI prices closing at $31.82/b on May 18. The April 20 NYMEX WTI market event proved short-lived, but the incident is still useful for highlighting the interconnectedness of the wider North American crude oil market. In addition to the NYMEX WTI futures contract, several important North American crude oil spot price markers also fell below zero on April 20, including WTI Midland, Mars, West Texas Sour (WTS), and Bakken Clearbrook. Although these markers correspond to different types of crude oils and trade at different places around the continent, the integration of North American crude oil transportation infrastructure and the use of NYMEX WTI in formulas used to calculate some other prices all but ensured that the highly local shock to NYMEX WTI on April 20 was quickly felt throughout the North American market. ... More »