Negative pricing

[5] In March and April 2020, demand for crude oil dropped dramatically as a result of travel restrictions related to the COVID-19 pandemic.

[8] Meanwhile, an oil price war developed between Russia and Saudi Arabia, and both countries increased production.

[6][9][10] West Texas Intermediate (WTI) futures went as low as −$37.63 per barrel[11] (though consumer prices did not go negative).

A trial for market manipulation is ongoing against Vega Capital London Ltd a group of nine independent traders at Essex who would buy oil futures with the expectation to win if the price went down at the end of the contract but are accused of doing so by deliberately buying big volumes and coordinating their activities to artificially push down the price, is estimated that on 20 April they traded more than BP, Glencore, and JPMorgan Chase at around 29.2% of the total volume in WTI crude oil futures and that their trades were correlated between 96.2% and 99.7%,[13][14][15] as prices went negative at the end of settlement in fact they would win money too so is estimated that in total they made around $660 million on just a few hours.

[17] When excess supply causes electricity prices to fall, some producers, including wind and solar, may cut production.

But for some coal and nuclear power plants, stopping and starting production is costly (the xenon pit may also preclude quickly restarting a reactor after a certain period of shutdown[19][20]), so they are more likely to continue production even if prices become negative and they must pay to offload the energy they are producing.

[22] Possible methods for avoiding/reducing negative electricity prices involve improving technology and expanding capacity to store excess power for later use (e.g., pumped hydro storage, thermal energy storage), distributing electricity more widely along a super grid, demand response, and better predicting surges in supply.

[17][21] In certain markets, financial incentives for the production of renewable energy can more than offset the cost of selling power at a negative price.

[22][24][25] Separate from tax credits are RECs (in the United States) or green certificates (in Europe), tradeable instruments that represent the environmental benefits of renewable generation.

[29] In Texas, a large buildout of wind energy has driven negative pricing in ERCOT, the state's electrical grid operator.

If negative prices are a possibility, market participants must verify that their systems can process them correctly.

This includes pricing models, market data feeds, risk management, monitoring for unauthorized trading, reporting, and accounting.