Energy & Environmental Markets 

Advisory Committee

March 24, 2020 Meeting

The Market Intelligence Branch / Division of Market Oversight
March 24, 2020

Disclaimer

2 

The views expressed represent those of staff in MIB, and do not 

necessarily reflect the views of the Commodity Futures Trading 

Commission, any of the Commissioners, the Division of Market 

Oversight, or other staff at the Commission. 

Consistent with Section 8(a) of the CEA, this presentation does not 

contain data or information that would separately disclose the business 

transactions or market positions of any person and trade secrets or 

names of customers.
March 24, 2020

Market Intelligence Branch (MIB)

3 

 Supports the Commission’s mission to promote integrity, resilience 

and vibrancy in the derivatives markets.

 Monitors the health and structure of U.S. futures, options, swaps 

and the various over the counter (OTC) markets.

 Highlight emerging trends.

 Identifies potential systemic risks.
March 24, 2020

Scope of MIB Monitoring

4 

MIB monitors characteristics of and developments in derivative markets. 

• Volume and activity

• Liquidity, order book depth, price, and implied volatility

• Circuit breakers, limit moves (up/down), velocity triggers

• Term structures, swap spreads, index activities

• Convergence and spreads (cash vs. physical delivery markets)

• Open interest, risk positioning

• Market participant positioning and activity

• Related market activities

• News, industry and government reports, fundamentals, and data
March 24, 2020

Products

5 

Wheat

Corn

Oats

Rice

Canola

Palm Oil

Soybeans

Grains

Soy Meal

Soy Oil

Oil Seeds

Cocoa

Sugar

Coffee

Frozen OJ

Softs

Feeder Cattle

Live Cattle

Lean Hogs

Livestock

Butter

Milk

Cheese

Dairy

Softwood

Hardwood

Rough Wood

Cotton

Fiber

Brent

WTI

Jet Fuel

Diesel

Petroleum

Gasoline

Heating Oil

Naphtha

Fuel Oil

Bio Diesel

Electricity

Iron Ore

Ethylene

Propylene

Methanol

Poly-Propylene

Chemicals

Silver

Gold

Platinum

Palladium

Precious

Copper

Aluminum

Zinc

Base Metals

Scrap Metal

Power & Gas

LNG

Solar / Other

Natural Gas

Urea

Emissions

Weather

Pollution

Carbon

Environment

Dry Freight

Wet Freight

Trucking

Freight

DAP

Sulfur

Fertilizer

UAN

Exotics

SOFR

Fed Funds

T Bonds/Notes

OIS

Interest Rate

Vanilla Rates

Swaptions

Caps / Floors

Swaps

Rate Baskets

Fed Funds

Basis

Various

FX Forwards

FX Futures

NDF

FX Options

FX

Retail FX

DXY

EM Index

NDOs

Dow Jones

S&P 500

Russell

Nasdaq

Equities

GSCI

VIX

Credit Baskets

HY Index

CDX IG

Crossover

High Vol

Credit

RMBX

ABSX

Synthetic CLOs

Lev Loan Index

CMBX

TRS Swaps

Sovereign CDS

Tranches

Synthetic CDOs

Agriculture, Nutrition & Forestry Energy & Natural Resources Banking & Finance

MIB monitors over one hundred different commodities, indices, 

financial derivatives markets.
March 24, 2020

U.S. Derivatives Markets

6 

0

2,000

4,000

6,000

8,000

10,000

12,000

 -

 20,000

 40,000

 60,000

 80,000

 100,000

 120,000

 140,000

 160,000

 180,000

 200,000

100,000

200,000

300,000

400,000

500,000

Ag 

Futures

Energy & Metals 

Futures

Total

(Carried 

Sub

Total

Carried

Forward

FX Swaps

Currency

Swaps

FX

Options

FRAs

Energy & M

Equity Index Futures

etals 

Options

Equity Index

Options

Bond

Options

Bond 

Futures

Fed Funds

Futures

Eurodollar

Futures

Eurodollar

Options

Sub

Total

351b

212b

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

0

Int. Rate

Swaps & 

Options

Ag 

Options

TOTAL

FUTURES

TOTAL

SWAPS

TOTAL

DERIVATIVES

Forward)

The U.S. derivatives markets are approximately $350- $400 trillion 

across futures, options and swaps (in swaps equivalents). 

The notional value of open interest in futures and options in 2008 was 

an estimated $30 trillion. Today, it is approximately $90 trillion.
March 24, 2020

Volume

7 

Futures contract volumes have reached nearly 60 million since February 

20th, with significant totals each day.

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

Opt Volume Fut Volume Source: CFTC Data

U.S. Futures & Option Contracts

Current and previous highest contract volume dates
March 24, 2020

Equity Index Declines

8 

The velocity of the COVID-19 market sell-off is one of the most extreme 

in equity markets over the past one hundred years.

Wall ST

Crash

1929

The Great

Depression

1937-38

Flash

Crash

1962

Black

Monday

1987

LTCM

Crisis

1998

9-11

2001

Dot Com

Bubble

2000

Financial

Crisis

2007-08

COVID

19

2020

0%

0%

0%

0%

0%

0%

0%

Source: CFTC data & Bloomberg -6

-5

-4

-3

-2

-1

The U.S. Equity S&P 500 Index
March 24, 2020

Equity Volatility

9 

Equity volatility during the current crisis is the highest observed in the 

past 30 years.

0

10

20

30

40

50

60

70

80

90

3/1/1990

11/1/1990

7/1/19913/1/1992

11/1/1992

7/1/19933/1/1994

11/1/1994

7/1/19953/1/1996

11/1/1996

7/1/19973/1/1998

11/1/1998

7/1/19993/1/2000

11/1/2000

7/1/20013/1/2002

11/1/2002

7/1/20033/1/2004

11/1/2004

7/1/20053/1/2006

11/1/2006

7/1/20073/1/2008

11/1/2008

7/1/20093/1/2010

11/1/2010

7/1/20113/1/2012

11/1/2012

7/1/20133/1/2014

11/1/2014

7/1/20153/1/2016

11/1/2016

7/1/20173/1/2018

11/1/2018

7/1/20193/1/2020

CBOE Volatility Index (VIX)

LTCM

Dot

Com 9-11

2002 

Market 

Crash

Financial 

Market

Crisis 2010

Flash

Crash

Greece

COVID

19

Bloomberg
March 24, 2020

U.S. Government Bonds

10

U.S. government bond yields reached their lowest levels in history as 

domestic and international investors seek safety. 

0

2

4

6

8

10

12

14

16

18

3/1/19772/1/19781/1/1979

12/1/197911/1/198010/1/1981

9/1/19828/1/19837/1/19846/1/19855/1/19864/1/19873/1/19882/1/19891/1/1990

12/1/199011/1/199110/1/1992

9/1/19938/1/19947/1/19956/1/19965/1/19974/1/19983/1/19992/1/20001/1/2001

12/1/200111/1/200210/1/2003

9/1/20048/1/20057/1/20066/1/20075/1/20084/1/20093/1/20102/1/20111/1/2012

12/1/201211/1/201310/1/2014

9/1/20158/1/20167/1/20176/1/20185/1/2019

10 Yrs 30 Yrs

CFTC data

Implied Yields for 10 and 30 year Treasury Bond Futures
March 24, 2020

U.S. Government Bonds

11

The whipsaw price action registered the largest down move in history 

and the steepest climb of yields within a period of seven days. 

0

0.5

1

1.5

2020 High

U.S. Government Bond Yields

2020 Low 2020 Low

Treasury Bills 2-Years 10-Years 30 Years Ultra Long Bond

2

2.5

2020 High

2020 High

2020 High

Percentage

2020 High

2020 Low

2020 Low

Source : CFTC Data and Bloomberg
March 24, 2020

U.S. Dollar Demand

12

The international demand for U.S. dollars affected cross-currency basis 

spreads and retreated as the Fed announced increased swap facilities to 

major nations.

-200

-180

-160

-140

-120

-100

-80

-60

-40

-20

0

1 Year 5 Year 10 Year

Canada Switzerland China Denmark Euro U.K. Hong Kong Israel Japan Korea Malaysia Russia South Africa

Source : CFTC Data and Bloomberg

Cross Currency Basis (bps)

Cross Currency Basis Swaps Spreads (USD Libor)
March 24, 2020

Liquidity

13

• Futures liquidity and top-of-book depth have declined and spreads 

have widened.

• Swap spreads have expanded and liquidity has diminished.

• Foreign exchange and NDF markets have wider spreads, lower 

liquidity. 

• Heavy activity in credit derivatives swaps with wider spreads.
March 24, 2020

Market Halts

14

Four level-one market-wide circuit breaker halts occurred in the equity 

markets (first since 1987), along with an increase in other market 

control measures, such as limit-up/limit-down bands and velocity-logic 

triggers.

Market Halts

0

20

40

60

80

100

120

140

2-Mar 3-Mar 4-Mar 5-Mar 6-Mar 8-Mar 9-Mar 10-Mar 11-Mar 12-Mar 13-Mar 15-Mar 16-Mar 17-Mar 18-Mar

Equities Energy Agriculture FX Metals Interest Rates

# of halts
March 24, 2020

Crude Oil Implied Volatility

15

In March, crude oil 3-month implied volatility spiked to its highest level 

in more than a decade as WTI hit an 18-year low on news of a 

breakdown in OPEC negotiations.

The 3 month implied volatility

0

20

40

60

80

100

120

140

Oct-05

Feb-06

Jun-06

Oct-06

Feb-07

Jun-07

Oct-07

Feb-08

Jun-08

Oct-08

Feb-09

Jun-09

Oct-09

Feb-10

Jun-10

Oct-10

Feb-11

Jun-11

Oct-11

Feb-12

Jun-12

Oct-12

Feb-13

Jun-13

Oct-13

Feb-14

Jun-14

Oct-14

Feb-15

Jun-15

Oct-15

Feb-16

Jun-16

Oct-16

Feb-17

Jun-17

Oct-17

Feb-18

Jun-18

Oct-18

Feb-19

Jun-19

Oct-19

Feb-20

COVID

19

Financial 

Market

Crisis

U.S. 

sanctions 

on Iran 

exports

OPEC decides to 

maintain 

production 

despite low 

prices

Hurricane 

Irene

Source : Bloomberg
March 24, 2020

Crude Oil Price Collapse

16

On March 9, 2020, WTI and global oil prices had the largest single day 

drop in percentage terms since the Gulf War in 1991. 

0

20

40

60

80

100

120

140

160

Jun-83 Aug-85 Oct-87 Dec-89 Feb-92 Apr-94 Jun-96 Aug-98 Oct-00 Dec-02 Feb-05 Apr-07 Jun-09 Aug-11 Oct-13 Dec-15 Feb-18

Source : CFTC data and Bloomberg

U.S. Crude WTI Spot Prices - Cushing
March 24, 2020

Crude Oil Daily Price Moves

17

Price volatility has moved oil prices by almost $22.50 per barrel (p/b) 

during this month. 

20

25

30

35

40

45

50

2-Mar 3-Mar 4-Mar 5-Mar 6-Mar 9-Mar 10-Mar 11-Mar 12-Mar 13-Mar 16-Mar 17-Mar 18-Mar 19-Mar 20-Mar 20-Mar

+4%

$44.76

$ per gallon

+1%

-3%

+10%

-4%

-10%

-4%

+1% -10%

-25%

Losses Gains

-6%

-24%

+24% -11%

$22.43

Source : CFTC Data

WTI Futures – Daily Price Moves
March 24, 2020

Crude Oil Demand

18

COVID-19 and the global lockdown have all but removed demand for oil, 

at least in the short term. 

-200

 Aug-19 Sep–19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 

0

200

400

600

800

1000

1200

1400

Source : International Energy Agency

KBD

Mar-20

Global Oil Demand Forecast for 2020
March 24, 2020

Crude Oil Forecast

19

Supply and demand forecasts showed an oversupplied market even 

before OPEC+ failed to reach an agreement. Additional barrels from 

Saudi Arabia, U.A.E., and other OPEC+ members in 2Q 2020 will only 

exacerbate the global supply glut. 

92.0

94.0

96.0

98.0

100.0

102.0

104.0

1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20* 2Q20* 3Q20* 4Q20*

Million barrels per day

Total Supply Total Demand *Projected. Supply numbers use 4Q19 OPEC data

Source: International Energy Agency

Global Supply and Demand Forecast
March 24, 2020

Stalemate 

20

 Asia’s largest importers (China, India, Japan, South Korea) recovering 

from COVID-19. Demand expected to be low next quarter.

 Russia and Saudi Arabia have the lowest oil production costs 

(estimated around $10 p/b). 

 Both countries rely heavily on oil revenues. Russian fiscal breakeven 

estimated to be $40 p/b. Saudi Arabia’s fiscal breakeven estimated to 

be near $80 p/b.

 Russia is unlikely to submit to any external pressure at least until the 

proposed mid-April constitutional change is completed. 

 The U.S. oil industry has higher production costs, estimated to be 

around $30 p/b, directly linked to U.S. corporate well-being. 
March 24, 2020

Gasoline

21

60

70

80

90

100

110

120

130

140

150

160

Cents per gallon

April May June Dec

OPEC+ Crisis

While the Gasoline term-structure is in contango, Gasoline prices are 

not expected to increase materially until the end of 2020. 

RBOB Gasoline Term Structure

April, May, June and December Contracts
March 24, 2020

Crude Oil U.S Production

Tight oil wells have high decline rates, requiring significant new drilling 

to keep overall production up. Average breakeven costs for new wells in 

many tight oil basins are well above current market prices. Absent price 

appreciation, domestic crude production may fall in the coming months.

 (700,000)

 (600,000)

 (500,000)

 (400,000)

 (300,000)

 (200,000)

 (100,000)

 -

 100,000

Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20

Barrels per day

Anadarko Appalachia Bakken Eagle Ford Niobara Permian Source: EIA Drilling Productivity Report

Legacy oil well production, select areas

22
March 24, 2020

Natural Gas Volatility

23

Natural gas volatility has doubled in the past two months, but pales in 

comparison to previous weather-related events. Futures prices are at a 

25-year low.

0

20

40

60

80

100

120

0.00

1.00

2.00

3.00

4.00

5.00

6.00

4/2/20185/2/20186/2/20187/2/20188/2/20189/2/2018

10/2/201811/2/201812/2/2018

1/2/20192/2/20193/2/20194/2/20195/2/20196/2/20197/2/20198/2/20199/2/2019

10/2/201911/2/201912/2/2019

1/2/20202/2/20203/2/2020

Volatility

Dollars per MMBtu

Prompt NG 30-day Volatility Source: ProphetX

Prompt NG futures prices v. 30-day volatility
March 24, 2020

ETF Markets

24

The growth of Exchange Traded Funds (ETFs) and Exchange Traded 

Notes (ETNs) markets has been a significant development since the past 

financial crisis. 

0

2

4

6

8

10

12

14

16

2020

Q1

2019

Q4

2019

Q3

2019

Q2

2019

Q1

2018

Q4

2018

Q3

2018

Q2

2018

Q1

2017

Q4

2017

Q3

2017

Q2

2017

Q1

2016

Q4

2016

Q3

2016

Q2

2016

Q1

2015

Q4

2015

Q3

2015

Q2

2015

Q1

2014

Q4

2014

Q3

2014

Q2

Leverage -Adjusted Gross Exposure* ($ Billions)

*Gross exposures, calculated in absolute terms (long/short neutral), of energy-only ETF population Source: Bloomberg, CFTC 

Energy ETF Leverage-Adjusted Gross Exposure 
March 24, 2020

Credit Markets

25

CDS spreads on the CDX High Yield and Investment Grade indices have 

widened significantly to 850 and 150 bps, respectively (from 280 bps 

and 43 bps on Feb 12, 2020). 

CDX.NA.HY.33 12/24 and CDX.NA.IG.34 06/25

0

100

200

300

400

500

600

700

800

900

8/10/2012 8/10/2013 8/10/2014 8/10/2015 8/10/2016 8/10/2017 8/10/2018 8/10/2019

CDX IG CDX HY
March 24, 2020

Credit Markets

26

A number of reference entities in the CDX NA.HY Index are trading 

above the current index spread of ~850 bps, with most energy 

companies trading at a spread well above it. There are ten entities with 

spreads above 2500 bps, of which six are energy companies.

 -

 500

 1,000

 1,500

 2,000

 2,500

0 10 20 30 40 50 60 70 80 90 100

CDX.NA.HY.33 12/24 – Reference Entities
March 24, 2020

High Yield Corporate Bonds

27

The energy sector represents a sizeable portion of the ~ $2.5 trillion 

high yield bond market. Airline, leisure, and hotel sectors, also impacted 

by COVID-19, represented a sizeable portion of the market.

0%

2%

4%

6%

8%

10%

12%

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

20002001200220032004200520062007200820092010201120122013201420152016201720182019

Energy Industry % of Total 

Debt Market Value ($ Trillions)

Bloomberg Barclays Global High Yield Index (LG30TRUU)

Bloomberg Barclays High Yield Energy (BHYETRUU)

% Energy Industry Composition of Total High Yield Bond Market

High Yield Bond Market Value
March 24, 2020

Leveraged Loans

28

The leveraged loan market has grown to over $1 trillion. The current 

environment has noticeably impacted leveraged loan market prices.

S&P / LSTA U.S. Leveraged Loan Index

Source : Bloomberg

50

60

70

80

90

100

110

Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20

Financial Crisis

COVID-19

U.S. Credit China Slowdown

Downgrade

U.S. Credit Market

Turmoil
March 24, 2020

Private Credit

29

The private credit markets rapidly expanded in recent years as large 

banks reduced exposure to smaller and riskier borrowers. As of June, 

2019, Assets Under Management (AUM) was around $812 billion.

0

100

200

300

400

500

600

700

800

900

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Assets Under Management ($B)

Source: Bloomberg/Preqin

(H1)

Private Credit AUM 
March 24, 2020

Private Credit

30

Investor composition of the private credit markets is quite diverse with 

broad representation from both institutional and private wealth funds 

actively participating.

Source: Bloomberg/Preqin

Institutional 

84% 

Private Wealth

16% 

Asset Managers

6%

Banks & Investment Banks

5%

Fund of Funds

5%

Other

9%

Family Office

9%

Wealth Manager

7%

Private Pension Funds

16%

Foundations

13%

Public Pension Funds

12% Insurance

9%

Endowments

9%

Lenders to private credit markets
March 24, 2020

Conclusions

31

 The derivatives markets appear resilient in the face of lower liquidity 

and historic volatility and volume.

 Economic threats remain elevated.

 MIB will continue to monitor and evaluate.
March 24, 2020 32

QUESTIONS?