After having negative interest rates in several countries, the fact that cash on deposit pays off and the loan is paid off. Here we are with the barrel of oil at negative price .
This is due to the actions of central banks after the 2008 crisis and the stimulus plans (rate cuts, injections, etc. to promote credit and consumption rather than savings. Historical and economic fact very risky for the financial stability of a country .
April 20, 2020, For the first time in the history of petroleum was quoted in negative price, that is to say that the producer pays the customer for a barrel of petroleum
The future contract concerned is the “crude oil – Wti May 2020”. A West Texas Intermediate (WTI) crude oil contract produced in the United States and a world benchmark in terms of black gold prices. Listed on NYMEX (New York Stock Exchange for Energy and Metals). Expiration for May 2020. .
The problem was that the cost of turnover (change of contract between one month and the other) between the contract May and June being historically high (around $ 12 before the fall), many investors did not roll over and it “disrupted the market”
Many reasons :
-Due to the drop in demand due to the Coronavirus, the global barrel storage capacities are overloaded, which causes this storage cost to increase and the price is passed on to the final product. It becomes more interesting to the producer to give money to get rid of the barrel so the cost of storage is expensive.
-For the May contract, the storage capacity at the place of delivery being full, it was invaluable to store additional barrels .
Now around -3.6 $ per barrel of 159 liters of WTI .
On this April 21 at 11:35 am, the June contract is experiencing a similar decline, now at $ 13 and down –36%
The consequences and economic implications of such an event are enormous. The consequences are likely to be violent for the financial markets and others …
Never in all of modern history has this happened or even thought, to follow …
The purpose of this article is to synthesize the most important elements in order to have an overview./p>
No comments on the dangerousness of the Virus nor advice of purchase or sale..
In a period like this, stay informed and protect yourself from market volatility. Optimum Market Analysis Luxembourg will make several articles when more precise information is present.
Sources :
https://edition.cnn.com/2020/04/20/business/below-zero-oil-gasoline-prices/index.html
https://www.barchart.com/futures/quotes/CLK20
https://fr.investing.com/commodities/crude-oil
https://www.bloomberg.com/news/articles/2020-04-21/world-s-biggest-oil-storage-firm-says-almost-all-space-is-sold?srnd=premium-europe
