Oil, Cheaper than WATER!!?

sonsj0513 (33)in #coronavirus • 5 years ago (edited)

About -37$...
Beyond the era when oil prices are cheaper than water, the days have come when prices of oil have fallen below 0$.

The prices of West Texas intermediate crude was below $0.00 in May.
BUT! That doesn't mean you can buy gas at a gas station at this price! It's becasue Oil prices at international and gas stations are different concepts.

The price of crude oil for May is the price of crude oil that will be traded from the beginning of May.
That is, it's not the 'in kind' price, but the price in the 'futures' market, which sets the price of oil up to a certain point and then trades the right to recieve it later.
Simply put it is the concept of putting dibs oil in advance, and reciving real oil at a later price.
So, traders in the futures market usually hold and trade futures certificates, and sell them to people who actually need them before the expiration date comes.

But as the COVID19 crisis reduced production and consumptio, neither the airline nor the oil companies that were buying futures certificates needed oil.
Therefore traders are still unable to dispose of the futures until now, almost the due date.
The problem is that as this condition continus, traders have exhausted their storage capacity.
With no oil to sell or store, certificates have become a headache.
Finally, in the end, traders decided to hand over futures even if they pay themselves.
Experts predict the slump will continue until all economic activities are normalized.
LIKE THIS, Covid-19 is causing unforeseeable circumtances in various areas.