Futures are not always well understood and the idea that oil traded at a negative price is INCORRECT, the futures did.
Typically futures are traded either as hedges to cover a physical position, or as speculation in order to reap a gain. In both cases the physical oil is not relevant as the hedger has no interest to actually sell the oil and the speculator has no desire whatsoever to either receive or deliver the stuff. Essentially the futures are created by a trade and extinguished by a trade. Each trade must have a counterparty as you cannot sell or buy without somebody else doing the opposite, even if the “house” always takes the other side for practical purposes.
Oil futures go out 10 years plus 2 months so there are more than 120 of them at any time. Virtually all the interest is in the front months, now June, July etc. All the action is concentrated there and consequently the open interest, that is the number of open contracts will initially grow and then shrink as the last day for the month (not calendar) approaches sort of like a balloon that you blow up and then let the air out. If all goes well all contracts will be offset before the final hour and the players move on. Some futures are cash settled but not oil futures, they can be delivered and must be delivered if not offset earlier, partly in order to keep a connection with the real world. This is when the theater goers all race to the exit at the same time because their counterparties refuse to play, at least not just yet. In the end of the day they all find each other but in those last hours very strange things can happen.
Anyway oil did not trade at –$40, the May futures contract did and this happened because the market in futures was cornered. Supposedly there was this lack of storage space but if that was true how come there was enough space the next day?
