As of April 20th, the May WTI crude contract traded more than $35 below zero for the first time in history. The market structure is similar to 2016 when railcars were being used to store crude; however, this time around the scale of global demand destruction and soon to be maxed out storage capacity has created an unprecedented supply and demand disparity.
It’s important to keep in mind a few limitations on this option: there are an estimated 30k Class 3 flammable liquid tank cars across North America, and per FRA regulations governing hazardous materials, these cars could only be stored on private track. Due to current front month pricing, this storage contango play may be more attractive now than ever before. But it could also be more difficult to execute due to stricter tank car regulations which limit the type of cars that can be used, and a reluctance for some railroads to move loaded hazardous materials into storage.
With that said, we’re seeing an increase in loaded storage requests and inquiries, not just for crude but for other commodities that are being impacted by the material decrease in consumption from COVID-19. Storage is becoming tighter every week and I anticipate that to continue in the near-mid term.