eli5 What is WTI and why is it crashing
In: Economics
Current events are not allowed on ELI5. Better to r/askeconomics about this.
Think of crude oil like apples. There are lots of different types that might be better or worse for certain applications, although you could technically use any of them for all or most things.
WTI is like the Macintosh of crude oil it’s an abundant oil that anybody familiar with oil who knows what it’s like. It comes from West Texas. In North America it is kind of the baseline crude oil much like Macintosh apples are a kind of baseline Apple.
It’s the main one that gets traded or another way to think of it is every oil gets traded based off of it.
So instead of having $1.99 for Macintosh and 2.09 for Granny Smith it be like if Granny Smith were sold for Macintosh + $0.10. That’s how real oil trades work.
What is crashing is futures or agreements to give/receive oil in the future. Specifically May futures. That I explained in [this](https://imgur.com/a/WW18bMU/)
thread which is kind of [viral](https://twitter.com/wcprice2/status/1252314034264772608) now on Twitter:
WTI stands for “West Texas Intermediate” – it’s a grade of crude oil.
It’s typically sold via delivery contracts and the last day to trade May delivery contracts was today.
There’s a problem though – literally every storage container on the planet is full because nobody is driving. If you had a May delivery contract to sell and nobody on Earth wants it you’re stuck in a bizarre oversupply market shock and basically offering to pay others to take the oil you can’t store.
That’s what happened today, oil speculators and producers had to *pay* refineries to take their oil because there’s so much oversupply.
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