Table 1: Futures prices for Crude oil, Natural gas, Nickel and Wheat

The exceptional occurrence of negative crude oil prices in 2020 served as a wake-up call for participants in the futures market, emphasizing the necessity of comprehending the intricacies of futures contracts, particularly in the context of physical delivery. Furthermore, it underscored the importance of recognizing the effects of supply and demand dynamics and the real-world constraints that can influence commodity markets, particularly during times of crisis.

In the spring of 2020, amid growing oil stockpiles caused by pandemic-induced shutdowns significantly reducing global energy consumption, the WTI Crude oil prices turned negative. Referring to Table 1,

1. Justify the reasons behind this phenomenon (3 marks)

1. How you would have strategized as a trader of this WTI crude oil Futures, approaching its expiry date in the coming April? (apply the knowledge learned from this course and provide the primary strategy) (3 marks)

Fitrec nrirec (12/31/219=1n) GenerIc irst contracts. Crude oll: vvest I exas Intermediate. Uata througn August 14, 2U23. Source: Bloomberg, CME Group, London Metal Exchange; author's calculations