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It's really not. The shutdown is what has directly led to the lack of demand that was always going to cause this once they weren't able to store any more excess.
The Saudis and Russians playing games didn't help anything, but this was inevitable once the country shut down. When you cut off demand, product stacks up and once you run out of the ability to store it, the price goes negative as you need people to take it off your hands.
BUT -- -we had a surplus to begin with.......
The lack of demand in the USA didn't help but it wasn't the catalyst for the price dorp.
It just wasn't.
The Saudis and the Russians started the game -- brought the price down AND then USA demand fell.
Futures contracts are tied to a specific delivery date. Toward the end of a contract's expiration date, the price typically converges with the physical price of oil as the final buyers of these contracts are entities like refineries or airlines that are going to take actual physical delivery of the oil.
. . .
Near the contract's expiration, traders just start buying the next month's futures contract. Those who stay in the position to the final day are typically buying the physical commodity, such as a refiner.
The West Texas Intermediate crude contract that fell more than 100% on Monday is for May delivery, and it expires Tuesday. With the coronavirus pandemic leading to unprecedented demand loss, and with storage tanks quickly filling up, there is no demand for this oil contract expiring Tuesday.
That's why it turned negative, meaning producers would pay to get this oil off their hands because there is no one that needs that crude this week with the country shutdown.
Futures contracts trade by the month. The contract for June delivery was 16% lower at $21.04 per barrel.
So after the May contract expires on Tuesday, oil will be back above $20.
Like it or hate it,the following is only my opinion:
American Haters scheming to keep barrels of oil below $25 dollars as
an attempt to kill the American Currency and energy producers.
An attempt by American Haters to destroy America as a super power.
The will of the American People are greater than any Anti American diatribe
verbal or physical.
The lack of demand in the USA didn't help but it wasn't the catalyst for the price dorp.
It just wasn't.
The Saudis and the Russians started the game -- brought the price down AND then USA demand fell.
If demand remained stable, you wouldn't have had this happen. With demand cratering, you would have had this eventually even if Russia and Saudi never got into a price war.
I'm gonna look into investing in green energy when the time is right. The oil industry is going to be a circus for the foreseeable future, and I'd rather invest in something that will be sustainable.
Could not think of a better opportunity to end dependence on fossil fuels. Renewable energy is the present and the future.
Yup. Quit sending your cash to other countries or other states. Keep your money local.
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