What are the implications for institutional traders left holding a long WTI contract at expiry, unable to take delivery?

Question

Given the historic drop in the front month WTI price today, I was wondering what the ramifications are for those professional traders who are left holding a long position. Note this problem won't normally apply to retail traders, since their brokerage would normally close out their long position in advance of them being required to take delivery. I'm only interested in the situation as far as banks and institutions are concerned. The reason I'm interested in this from a personal finance perspective is because of the implications for the stock prices/credit risk of banks and trading firms.

S Spring · Answer

The last available oil storage is probably DOT-111 Tank Cars as on the railroad tracks. A railroad company is paid to store the oil.

Or the U.S. Strategic Petroleum Reserve might begin selling oil storage.

D Stanley · Answer

Anyone left holding a long position at the end of trading tomorrow (the expiry date of the May 2020 contract) will be contractually obligated to take delivery of the oil and store it somewhere.

There's no distinction between retail and institutional trades here - anyone who doesn't want to take delivery is going to have to sell their long position. With no storage available, that means that they're paying someone to take this contract off of their hands. Both are taking a bath if they got out today (and very likely tomorrow).

What are the implications for institutional traders left holding a long WTI contract at expiry, unable to take delivery?

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