The Futures Market is where the Imbeciles go nuts.

By Wolf Richter for WOLF STREET.

Futures of US crude oil grade WTI collapsed by 24% back to $87.70 a barrel, and at one point as low as $83, after they’d spiked by 28% from about $90 on Friday to over $116 overnight on Sunday. Historic massive ridiculous volatility. That spike occurred on sheer maniac speculation, triggered by context-less headlines, and a whole generation of traders that have been waiting their entire career for the moment when the Strait of Hormuz gets blocked so that they could go hog-wild.

As I like to say, this is the same market where the price of WTI futures dropped to an absurd negative -$37.63 per barrel in April 2020. The futures market is where the imbeciles go nuts.

These crazy price movements make crude oil futures look like cryptos, meme stocks, other crazy stocks, SPACs, IPO stocks, whatever, many of which have entered into our pantheon of Imploded Stocks. Manic speculation and gambling were driving this. But unlike cryptos and meme stocks and similar stuff, crude oil prices do matter, and a lot (hourly chart via Investing.com):

The discussions among the G7 Nations to release some crude oil from their strategic petroleum reserves is aimed not at increasing supply, because that’s not what is needed at this point, but at hammering down the imbeciles in the futures markets.

The US SPR has 415 million barrels of crude oil in it, down from 727 million barrels at the peak in 2011. By the time Biden moved into the White House, the SPR was down to 638 million barrels. Given the large production in the US, and the exports, the SPR is no longer needed to deal with shortages and OPEC boycotts, which had been the original purpose, but to hammer down the imbeciles in the futures market.

Trump was out there too, hammering down the imbeciles in the futures market and said he’ll wave some sanctions on Russian oil, and that Iran is a “short-term excursion” and that it will be over “very soon.”

The US imports very little crude oil that comes through the Strait of Hormuz. Only 2% of the US petroleum liquids consumption came through the Strait of Hormuz in 2024, the lowest in 40 years. The US is the biggest oil producer in the world. It exports more crude oil and petroleum products than it imports. It imports crude oil, refines it, and exports diesel, gasoline, jet fuel, etc. Even refineries in “oil island” California are in on that trade. To Mexico alone, US refiners exported 1.1 million barrels a day of diesel, gasoline, and other petroleum products. In total, the US exported 6.7 MMb/d in petroleum products in 2025, including 2.3 MMb/d in transportation fuels (diesel, gasoline, and jet fuel).

Refining and then exporting the product is a huge business, and it matters to the US supply, but the Strait of Hormuz doesn’t fundamentally matter to the US supply, and there is no fundamental reason for US crude oil prices to spike like this.

Crude oil is now a global product for the US since the US is a big exporter of crude oil and petroleum products, and so manic speculation goes in tandem across the world.

Gasoline futures did a similar roundtrip. Today plunged by 16% back to $2.69, and at one point as low as $2.55, after they’d spiked by 16% from $2.75 at the close on Friday to $3.20 overnight on Sunday. This stuff is just nuts (hourly chart via Investing.com):

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