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Futures-based commodity ETFs when storage is constrained

Author

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  • Sirio Aramonte
  • Karamfil Todorov

Abstract

Exchange-traded funds (ETFs) that hold futures contracts on commodities are an important link between commodity markets and financial markets. When commodity storage capacity is constrained, investor flows into ETFs holding futures can lower, instead of raise, commodity prices due to potentially high costs of physical storage. April 2020 briefly witnessed negative prices for the nearest-maturity futures contract on WTI oil, possibly due to such a combination of storage constraints and investor flows into ETFs.

Suggested Citation

  • Sirio Aramonte & Karamfil Todorov, 2021. "Futures-based commodity ETFs when storage is constrained," BIS Bulletins 41, Bank for International Settlements.
    • Handle: RePEc:bis:bisblt:41
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    Cited by:

    1. Karamfil Todorov, 2021. "Passive funds affect prices: evidence from the most ETF-dominated asset classes," BIS Working Papers 952, Bank for International Settlements.

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