How can retail investors take physical delivery of oil if they own it by settlement? Is there a shared service that allows smaller investors to do that? Are there futures by which we can specifically bet on storage prices of commodities?
1. You need to have a contract with a pipeline/storage company in Cushing, OK. 2. I don't know - probably not. 3. There are no storage futures, but there are pipeline/storage companies you can invest in (most are MLPs, which have been crushed). 3a. An interesting angle on investing in storage is tanker stocks (NAT, EURN, STNG, etc.) They are being rented out at exorbitant rates as floating storage right now. The blog Adventures in Capitalism lays out the thesis. (Not an endorsement - do your own due diligence.)
I'd think that retail traders would automatically close your position before you're at risk of having to accept delivery. But I don't trade commodities precisely because I don't want to accidentally run this risk.
Do they allow selling a delivery note in ebay. I think the guy who has the delivery note can short the next month and hope to get assigned. Since it is crude oil there may be statutory requirements for physical delivery. A trading firm may know how to help out.
On the settlement date, the buyer is obligated to purchase 1,000 barrels of crude oil (unit for 1 crude oil futures contract) from the seller. 1 Barrel = 42 Gallons or 158,98 Liters. 1000 Barrels = 42,000 x 1 Gallon Milk. Conclusion: You would be a fool to take delivery, especially now when there is no place to store them. You can't just store them in your garage or backyard either.
Thanks everyone for feedback. May be the process of storing crude is not so transparent or retail-sized leading to panic in front month futures. Had there been a storage futures or a storage lease per 1000 barrel that can be bid on exchange, this type of basis explosion would not have happened in may contracts. Am I thinking this correctly?
No. The thing collapsed because there's no place to store it, period. What the hell would a storage lease do? It is physically deliverable.
Delivery shall be made free-on-board ("F.O.B.") at any pipeline or storage facility in Cushing, Oklahoma with pipeline access to Enterprise, Cushing storage or Enbridge, Cushing storage. Delivery shall be made in accordance with all applicable Federal executive orders and all applicable Federal, State and local laws and regulations. For the purposes of this rule, the term F.O.B. shall mean a delivery in which the seller: (1) provides light sweet crude oil to the point of connection between seller’s incoming and buyer’s outgoing pipeline or storage facility; (2) in the event of the buyer's election to take delivery by interfacility transfer ("pumpover") to either Enterprise, Cushing or Enbridge, Cushing, from seller's delivery facility, bears the lesser of the pumpover charge applicable for pumpover from seller's delivery facility to Enterprise or Enbridge; and (3) retains title to, and bears the risk of, loss for the product to the point of connection between the buyer's outgoing and the seller's incoming pipeline or storage facility. At buyer's option, such delivery shall be made by any of the following methods: (1) by interfacility transfer ("pumpover") into a designated pipeline or storage facility with access to seller's incoming pipeline or storage facility; (2) by in-line (or in-system) transfer, or book-out of title to the buyer; or (3) if the seller agrees to such transfer and if the facility used by the seller allows for such transfer, without physical movement of product, by in-tank transfer of title to the buyer. https://www.cmegroup.com/content/dam/cmegroup/rulebook/NYMEX/2/200.pdf