Oil – The Black Plague.
By Chris C. May 2020
On April 20th 2020 the price of oil in the futures market went negative $35.00 per barrel. What does this mean for the price of fuel? Nothing!! That’s if you live in New Zealand. Elsewhere around the globe prices have dropped. So why has the price all of a sudden gone negative? It has to do with the storage of oil. Because of the Covid 19 scare there has been a lack of demand for what once was black Gold.
Everyone who consumes oil and it’s by products are safe and sound in their homes with their vehicles left idle. This has flooded the market with an over-supply and has burdened the storage facilities that hold bulk oil whether it’s at the refinery side or the distribution side of the market. I am not an expert on futures markets but I will hopefully give “you” the reader a sound condensed explanation on market theory here.
There is a disconnect between futures prices verses actual commodity spot prices. On one hand The Futures (virtual) price is based on an entity (market trader) taking out a contract at a particular price in the future for a commodity.