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Money and business
Reuters
Why is the price of US crude oil negative?
US futures contracts for “West Texas Intermediate” crude during trading Monday below zero, registering the lowest level in history.
According to the agency “Bloomberg”, contracts for “West Texas Intermediate” crude, at 21:55 Moscow time, were negotiated at -37.63 dollars per barrel (negative level), a decrease of 305.97%.
Bloomberg
US crude oil trade trend in about 5 years
Experts attributed the commercialization of the US crude contracts. USA For delivery in May at negative levels, for various reasons, including technical ones, as expired oil contracts expire on Tuesday (April 21, 2020), so the contract owner must receive the quantities of oil stipulated in him, and with the warehouses in the United States full Merchants began to get rid of these contracts, because whoever received would not find a place to store the quantity, and if they found the place, the cost of storage would be very high.
That is, whoever has the contract must pay the costs of storage, transportation and other expenses, and commercial contracts negatively mean that the seller is willing to pay the buyer in exchange for owning the contract and is the lowest cost to the seller that the costs of owning and storing oil.
Bloomberg
Why the price of crude # Oil The negative?
1️⃣The reason is that exchanges of this type are contracts and each contract has a delivery date, which is now negotiated is the delivery of month 5 and the contract ends tomorrow and, therefore, whoever has the contract must receive it, the problem if you receive it you will not find a place to store the oil and if there is a cost to store it is very high
– Abdullah bin Abdul Rahman Al Rabdi (@Rebdis) April 20, 2020
2️⃣
Therefore, whoever has this contract must pay the storage costs and transportation fees, etc. for that now it is negotiated negatively and this means that the seller pays the buyer in exchange for owning the contract and it is the lower cost for the seller than the costs of owning and storing it.– Abdullah bin Abdul Rahman Al Rabdi (@Rebdis) April 20, 2020
It should not be forgotten that oil markets are under pressure due to declining global demand for oil due to the Corona pandemic and measures taken by governments to limit the spread of the virus.
The collapse in the oil market occurs amid a state of economic stagnation due to the repercussions of the spread of the Corunna virus and the measures taken to combat it.
The International Monetary Fund warns that putting the world’s economies on a downward spiral will be the deepest thing since the Great Depression of the 1930s.
Source: RT
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