Publications: Notes at the Margin

Oil's Liquidity Problem (May 26, 2026)

 

Cash prices for crude oil have surged from $71 per barrel on February 27 for Brent to $144 on April 7 and back to $107 on May 22. During the same period, WTI prices rose from $67 to $112 per barrel, then fell back to $100. The gap between the two (see Figure 1) has generally been unexplained.

 

One possible explanation is liquidity, that is, the amount of money offered for crude in the futures and physical markets may be limited. The massive move of cash into AI stocks may be responsible for the constraint.

 

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