Negative Oil Futures Explained
This is one of the best clear explanations I have ever heard!
Oil futures explained:
For my friends who ask how oil was trading could be negative $37/bbl last week:
Thompson Energy analysis - UNDERSTANDING Crude Oil trading at minus -$37
Imagine the following scenario : You pay $500 today and commit to
receiving a hooker at your house in 15 days because your wife will
be traveling. This is called a Futures Contract.
Unfortunately, lockdown came and you are locked down with your wife at
home for the next 60 days. This is called “now you are screwed,” and
you cannot fulfill the escort company's Futures Contract.
So now you do not want this woman to show up at your house at all, and
try to find anyone of your friends to pass off this futures contract,
any neighbors or, anybody. But you find no takers because now
everybody is under lockdown with their wives and families. You find
you cannot sell this hooker commitment because nobody can take
delivery of the girl, and there is no where to stash her. Nobody can
receive the hooker at home anymore. Everyone is in full storage.
To make matters worse, not even the pimp (Chicago Mercantile Exchange)
who sold you the hooker contract has no more room to receive girls
because his house is full of girls out of work under lockdown.
So now you will have to pay anyone just to take the girl off your
hands. So someone tells you I will take the girl off your hands but
you pay me $37 to do it. This is called negative price when you
deliver the girl that cost you $500 to the willing buyer and pay him
$37 to take delivery.
Got it? This in a nutshell is what happened to the Oil Futures Market last week.
Auntie Dee wrote:
PERFECTLY CLEAR! THANKS!
"PERFECTLY CLEAR! THANKS!"
Good for you Auntie.
Some liberals here are scratching their heads.
Could be dandruff also.
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