Investors were shocked on April 20 when oil futures set for May delivery fell below zero for the first time ever . Although the negative oil prices lasted less than 24 hours, the plunge started a debate about whether it could happen again this month with the June futures.

In the days after the price first plunged, some analysts predicted it could happen again , because the dynamics in the market weren’t expected to change. But that now looks increasingly unlikely—both because of the dynamics of crude trading and because the oil market isn’t in as dire straits as it was two weeks ago. West Texas Intermediate crude futures have rallied more than 40% this month, to above $23 a barrel.

“No June will not go negative,” Richard Redoglia, CEO of Matrix Global, wrote in an email. “It might see some weakness, but the panic is over.” Matrix Global runs auctions for crude storage space.

To see why, it helps to understand oil trading.

West Texas futures—the financial instrument that went negative—give investors a unique way to track the oil market. They are contracts that result in the buyer receiving barrels of crude oil after the contracts expire. By comparison, Brent crude, the international oil benchmark, settles in cash. People who own West Texas crude on the day the contracts expire have to be prepared to receive 1,000 barrels of oil. Usually, that isn’t a problem because buyers can rent storage tanks in Cushing, Okla., the delivery point. But in April, all of the storage in Cushing was booked, so traders who were still holding the contract near expiration couldn’t put it anywhere. And no one wanted to buy the contracts. So they fell to negative $40 a barrel, implying that sellers would pay buyers $40,000 per contract.

Some of those dynamics are still in place. Covid-19 shutdowns have led to reduced oil demand, so oil producers have nowhere to put the oil they are pumping out. Instead of refining it into gasoline, they are putting more of it into storage. So storage is still tight in Cushing. People holding June futures won’t find much storage available for purchase.

But other dynamics make a negative prices less likely. For one thing, traders know that negative prices are theoretically possible. Before April, it wasn’t clear to many traders that negative prices were possible; the Chicago Mercantile Exchange adjusted its computer systems to allow for normal trading at negative prices in April. “The element of surprise is gone,” CFRA Research analyst Stewart Glickman wrote in an email.

Going into the weekend before the expiration of the May contract, there were more than 100,000 open contracts still trading. Many of those people probably expected to be able to sell them or roll those contracts over to the June contract. But come Monday, no one wanted to touch the May contracts, because they were trading at a deep discount to the June contracts. The pattern is known as contango, where oil set for delivery in future months is worth more than it is today, because people expect more people to be using oil in the future (in this case, because Covid-19 shutdowns are expected to ease).

Oil is still in contango today, but it isn’t nearly as steep as it was then. At its height, the spread between the June and July contract was about $6. Today, that spread is less than $2. And the biggest crude buyers have mostly avoided buying into the June contract, instead shifting their bets to July. The U.S. Oil Fund exchange-traded fund (ticker: USO), the most popular way for investors to bet on the price of crude, has already rolled out of the contract and into later-dated months. Open interest in the June contract is at less than half the level it was for the May contract at the same point, according to a report from ING on Thursday.

That has made the June contract less precarious. If most traders move out of it early, there won’t be many stuck looking for storage on the date of expiration again.

The new dynamic suggests that “market participants who do not have the capability to take physical delivery will likely not hold their position in the final days of the contract’s life,” Warren Patterson, head of commodities strategy at ING, wrote in the report.

Beyond the trading dynamics, the oil market has been moving closer toward balance in recent days. Producers around the world have cumulatively reduced their output by more than 10%, and demand has slowly started to return as countries have begun reducing restrictions on movement. As oil held in storage starts getting used for gasoline and diesel, Cushing tanks may open up too.

Nonetheless, some analysts think the recent rally in oil prices could fade. Glickman doesn’t expect oil to go negative, but he also doesn’t expect things to be hunky-dory for a while.

“With all that said, I’m still not a believer in this oil rally,” he wrote. “Prices don’t have to go negative to worry about rising storage and terrible visibility about the extent to any demand recovery.”

By Avi Salzman from Barron’s on May 7, 2020