Derivatives Accident: The Crude Oil Treasure Incident Research

Jing Jin

doi:10.54691/bcpbm.v47i.5163

Authors

Jing Jin

DOI:

https://doi.org/10.54691/bcpbm.v47i.5163

Keywords:

Crude Oil Treasure; Bank of China; Negative Price.

Abstract

The price of the WTI2005 crude oil futures contract was concluded at -37.63 US dollars per barrel on April 20 at US Eastern Time. This is the first negative price of WTI crude oil since it was listed on the Chicago Stock Exchange, causing vast losses to the Bank of China and crude oil treasure investors. In order to avoid similar accidents in the future, both internal and external risks need to be evaluated. The Bank of China is primarily accountable for the accident as the seller of the crude oil treasure due to its blatant incompetence in regard to the company's products, sales, risks, disclosure, supervision, and internal controls. However, external factors including COVID-19, the Organization of the Petroleum Exporting Countries, the CME Clearing, as well as regulators and consumers of crude oil treasure actually have some obligations thereby providing suggestions to banks, regulators, and investors. This study is vital for the use and regulation of derivatives in light of the rapidly expanding and developing financial sector in China.

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