The good news for users of the London Metal Exchange is the exchange’s delivery mechanism that makes it virtually implausible, while its contract structure makes it even more unlikely.
The reason the West Texas Intermediate crude oil contract slumped
is because its delivery is based on storage in Cushing, Oklahoma, where space is rapidly filling up. While market participants scrambled to offload positions to avoid delivery once the contract expired, the price of crude fell as low as minus $37.63 per barrel.
The situation was compounded by the fact that exchange-traded fund United States Oil (USO) - which accounted for around a quarter of May contract volumes - was not designed to take physical delivery and, therefore, had to dump its oil.
In contrast, the delivery of LME...