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WHY ARE GLOBAL oil prices suddenly front-page news and what exactly is negative pricing?
In recent weeks, the price of oil has been plummeting thanks to a decline in global demand linked to what the International Monetary Fund is dubbing ‘The Great Lockdown’.
In the US, the collapse in price is being “driven by a precipitous drop in demand caused by the market expectation that the US lockdown could continue into May”, according to Tai Hui, Chief Market Strategist at JP Morgan Asset Management.
This isn’t surprising, given flights are grounded and people are driving much less for work and leisure.
Last week, major oil producers agreed to cut production of oil to prop up prices, but so far the impact has been negligible.
This morning, European oil prices slumped to under $20 per barrel, reaching their lowest level for more than 18 years.
Yesterday, US oil prices slid below $0 for the first time ever, trading as low as -$40 a barrel (a barrel is a unit of measure used in oil pricing to denote 159 litres of crude).
Although prices have rebounded slightly today, they remain in negative territory.
Unfortunately, this does not mean that if you can find a friendly Texan oil baron, they will pay you to take a barrel of crude off their hands and stick it in your garden shed. But it’s not a million miles away from that either.
Traders and investors who bet on oil do so in so-called ‘futures contracts‘, which have fixed time limits. Under normal circumstances, it means that they pay today to collect a certain number of barrels in the future, gambling that the price of a barrel will increase in the interim.
Most traders are not in a position to actually receive a delivery of a few thousand barrels of crude once the contract has ended. So oil ‘futures’ get traded on the open market before the contract expires, allowing the investor to cash in on the increase.
European prices
Global oil storage is a finite resource at the best of times. It’s in particularly short supply at the moment because of a row between Saudi Arabia and Russia, which resulted in the Saudis boosting oil production earlier in the year.
Today is the closing date for May contracts. These are normally busy days for trading but with the current crisis weighing down the price of a barrel and the global storage shortage, things have gotten (to say the least) very interesting.
Trifecta Consultants analyst Sukrit Vijayakar described it as “one of the most extraordinary trading days in the history of any commodity”.
Traders in US oil are currently willing to pay buyers for storage costs just to offload their barrels so they aren’t faced with having to receive deliveries.
This is the essence of negative pricing.
Analysts say that the focus is now on the June contracts.
Hui explained, “If the economic reopening takes longer than expected, we could see pressure further out in the futures curve.”
With reporting by - © AFP 2020
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Ahhh here leave it out.. what about the words of wisdom from Michelle with regards to the bravery awards to the garda. Priceless, just priceless. Any chance of having a Saturday/Sunday morning Darwin post of the week where a stupid comment (not a troll) acts as an application form or would this be seen as bullying :(
I agree, Michelle was outstanding!
Michelle was just the tonic for a bad week.
It’s a long time since I had such a laugh Michelle .
Thanks.
I was hoping her comment was here to.. really injoyed the replies she got.. made my day so she did..
I understand her initial comment was somewhat comical to read but what wasn’t comical was when no less than 20 users began berating her with varying degrees of snide remarks. I also understand that she retaliated in a poor manner… But like the saying, what do you expect from a badger if you back it into a corner? The comments section was something you could expect on a YouTube thread but I was disgusted to see such a personal attack with ‘crowd mentality’ against a single person…. But hey, it was all in the name of fun I guess so who cares? I do.
@ harry, i completely agree with you. I don’t agree with Michelle’s opinion but it was just that, her opinion. From the moment she posted her opinion she was met with a barrage of abuse, calling her a moron, retarded, dumb, half brained….. She actually tried to explain herself and her opinion 3 or 4 times before she resorted to petty insults. It’s pretty concerning that most of the so called “intelligent” posters felt the need to instantly react to her comment with childish name calling. Pot, kettle, black I think!
I was surprised at how quickly a usually fairly intelligent forum for debating current events descended into something that seemed more like a primary school yard. I don’t mean to be condescending but who knows if she has learning issues or otherwise, maybe she has none but it still doesn’t excuse the behaviour of a supposedly civilised society.
I laughed out loud may have given her a red thumb but didn’t partake in the crude comments, don’t like the mob mentally of bullying but her first few comments were priceless till people posted with venom.
And it’s true what they say about bullies being cowards when you look at the sudo names used.
Which article? I’m intrigued!
Promise to be nice and no name calling,
http://www.thejournal.ie/seven-gardai-honoured-medals-bravery-672775-Nov2012/
Just read that thread re the gardai and the comments that followed..looks like some have been deleted already.. What id like to know is why the whole thread hasnt been taken down? Its an absolute disgrace particularly when you take into account the recent stories regarding cyberbullying etc. There was little or no debate in relation to the content of the story, the comments reduced to total and utter personal abuse. how anyone could have enjoyed reading it is astounding.
Katie Does, brilliant comment.
Big time…but the Opus Dei dinosaurs are still trampling.
I did not post twice , I swear!
I’d like to thank my mom and dad and my brothers and me dog and my producer and anyone who knows me , thank you so much …..sob ..;)
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