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What really happened to the historical fall in the price of WTI crude oil?


The most surprising news of the day yesterday without a doubt was the collapse of United States' WTI (West Texas Intermediate) oil futures.

Unlike Brent futures that, even if they have fallen to their historical lows in recent decades, have managed to stay above $ 20, those of WTI, the oil traded in the United States markets that expires today, Tuesday April 21, have been trading in negative territory, causing differences between the two most immediate maturities (May and June) of more than 60 dollars.

This is not the first time this has happened. Looking back on history before electronic exchanges, in 1987 was made a session with prices that fell into negative territory, however, without closing at par, as happened yesterday.

This means that to get rid of the contract, the owners of the bought futures, generally used by financial professionals or operators in the sector, prefer to get rid of them with losses before the expiration date so as not to risk having to bear higher costs than would require the storage of the raw material itself.

In a social and health context such as the current one that is forcing the closure of many activities and, consequently, a collapse in oil demand (in mid-April it was estimated at around 36%), shale oil producers Bituminous, the crude material related to the WTI, after having filled the tanks available for storage, have preferred to pay the buyer to avoid incurring additional costs necessary for the rental of tanks.

This shows that a possible interruption of production is much more expensive than continuing to extract new oil, the so-called oil shale oil, which is used almost entirely for self-sufficiency in the United States of America. This opens up completely new scenarios in a global macroeconomic context already affected by the outbreak of the coronavirus pandemic.

The collapse of oil demand in Europe and the United States is changing the macroeconomic aspect for both transportation and storage of a raw material that was running out until just over a decade ago, something that is no longer the case today. , thanks to a new extraction system called 'fracking' that required significant initial investments and that today, according to certain mathematical calculations, requires less costs instead of stopping its production / extraction.

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