This is Why the May Oil Contract Price Went Negative on Monday

[Natural Citizen]

Rather concise explanation; kept country simple...

Futures oil contract trading is generally done by two different groups, speculators and commercial hedgers.

Speculators are essentially taking a position on where oil will be at a future time. If they think it will go higher, they will buy an oil contract(s) to profit from what they expect, a higher price. If they believe oil will be lower, they will sell (short) oil contract(s) to profit from the decline they expect.

Commercial hedgers are a different breed. They are hedging positions they have as part of their business. For example, an oil producer knows that he is going to produce X barrels of oil in a given future month. He likes the current price of that future month's contract and so sells some oil contracts to hedge his production, essentially locking in the money he will receive for that oil.

Continued...

This is Why the May Oil Contract Price Went Negative on Monday

Robert Wenzel

www.economicpolicyjournal.com

 

[OnePercenter]

Rather concise explanation; kept country simple...

Futures oil contract trading is generally done by two different groups, speculators and commercial hedgers.

Speculators are essentially taking a position on where oil will be at a future time. If they think it will go higher, they will buy an oil contract(s) to profit from what they expect, a higher price. If they believe oil will be lower, they will sell (short) oil contract(s) to profit from the decline they expect.

Commercial hedgers are a different breed. They are hedging positions they have as part of their business. For example, an oil producer knows that he is going to produce X barrels of oil in a given future month. He likes the current price of that future month's contract and so sells some oil contracts to hedge his production, essentially locking in the money he will receive for that oil.

Continued...

This is Why the May Oil Contract Price Went Negative on Monday

Robert Wenzel

www.economicpolicyjournal.com

Much better article...

Why oil prices just crashed into negative territory â 4 things investors need to know

An oil futures contract just closed in negative territory for the first time ever. Here’s why, and what it says about the market and the economy.

www.marketwatch.com

 

[Toddsterpatriot]

Rather concise explanation; kept country simple...

Futures oil contract trading is generally done by two different groups, speculators and commercial hedgers.

Speculators are essentially taking a position on where oil will be at a future time. If they think it will go higher, they will buy an oil contract(s) to profit from what they expect, a higher price. If they believe oil will be lower, they will sell (short) oil contract(s) to profit from the decline they expect.

Commercial hedgers are a different breed. They are hedging positions they have as part of their business. For example, an oil producer knows that he is going to produce X barrels of oil in a given future month. He likes the current price of that future month's contract and so sells some oil contracts to hedge his production, essentially locking in the money he will receive for that oil.

Continued...

This is Why the May Oil Contract Price Went Negative on Monday

Robert Wenzel

www.economicpolicyjournal.com

Thus, the buyer has to pay big time to get rid of his oil. That is incentivize the original seller to keep his oil. A 50% incentive above the original hedge price appears to be the price.

The commercial hedger sold his oil at $25, in this example, and he could buy it back at -$37.50.
His profit is $62.50, 250%...…...

So if a hedger sold his oil in the May futures market at $25 per barrel, he has no incentive to allow the contract to be bought from him

Umm....he owns the physical oil, he SOLD the futures contract. That contract can't be bought from him again.....he's already short it.

unless the buyer is willing to pay him more than the $25 per barrel he received.

Unless a seller is willing to charge him less than the $25 per barrel he received.

 

[MindWars]

and here is why we will never go back to normal again. The recession coming ( it's here) will make the great depression look like a picnic. Keep laughing .
This crash is going to be " GLOBAL"

 

[MindWars]

and here is why we will never go back to normal again. The recession coming ( it's here) will make the great depression look like a picnic. Keep laughing .
This crash is going to be " GLOBAL"
View attachment 326642

Oh and by the way zombies your PENSIONS are being stolen as we speak lol...

 

[Natural Citizen]

Heh heh. I guess market experts are good for something after all, huh?

 

[Natural Citizen]

Oh and by the way zombies your PENSIONS are being stolen as we speak lol...

I'm glad I saw this stuff coming thirty years ago.