Negative Crude Oil Give Away For Idiots
Hello lads! Been awhile I've taken day off from financial and trading talks. I've been on "holiday" as there's nothing much excites me. First I would like to highlight today we have a special event where crude oil price falls to the negative region.
Wait?! Negative?! Which means you pay me to own crude oil?!
The price on the futures contract for West Texas crude that is due to expire Tuesday fell into negative territory -- minus $37.63 a barrel. That’s right, sellers were actually paying buyers to take the stuff off their hands.
Ok hold the horses. I'm going to give away a brief explanation about why is it not possible to obtain free crude oil and the same time getting paid from the seller. Before we go forward, let's have a look at below chart from the spot market.
Read more at ET Market News
Ok. So where is the negative price tags?! Give it to me my crude oil and pay me the money! Hah! When it's too good to be true, chances are?! It is. There's no free lunch in the market. When everything seems to be too good, it usually comes with a catch. The negative price tag you saw, is from the futures market.
Forget about the freebies
You see, I believe there are enough experts explaining why the oil price went below negative value. And you and I know, there's no such thing as negative because the moment you take up that contract, you're bound to bear a devastating future contract that has a huge cost may incurred in the FUTURE. I don't wanna go through that anymore, but they just know they can't hold that contract anymore, and it's like a time bomb ticking towards the end it does not explode but they will have to start paying for transportation fee. Reminds me there's one time someone bought a huge contract of corn, and when the futures contract matured, he has to bear a crazy amount of transportation fee to transport those corns and he'll have to find ways to dispose them off or there will be 2 container of corns sitting right infront of his house. And this is crude oil, what are you going to do with it?
Source from Pixabay
Technically, 1 barrel of oil is still 1 barrel of oil. Even nobody wants to buy it, it will still be $0, it should not go to negative. When it goes to negative value, meaning it becomes a liability. Someone will have to spend more money to further process it or get rid of it.
Get real with spot market
Ok. Despite no free candies, what can we do with the present situation? You and I both know, for the shortest period, we can't deal without crude oil. The transportation still required diesel, gas. What we can do now? Well, as we have always decided, break it down to different levels, and start buying the contracts on it's way down.
Let's get a demo account, kick it start, but do it as if it's real money you have in it. Which is why I put in 0.01 orders instead of going in gigantic positions! Don't forget, these brokers are bucket shops! They will jack up your orders by leverage, and kill your positions with margin call. If you do not know what is margin call? Do some study, we will come back to that someday. If you need a demo account, feel free to visit any FOREX broker. Once again, I did not ask you to trust them. If you read Rich Dad Poor Dad before, you should know there's a famous quote, the brokers are called broker because they're broke, and they're broker than you. I'm using Meta Trader 4, it's a trading platform with powerful indicators. We will see how this go, and I may be covering more about technical trading. And who knows later we will build our own robot and help us parking positions.
Cheers and have a good day.
Originally posted at the other chain
A quick update. As at current status after 24 hours.
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Now imagine what the gold price will be if people started to take physical delivery of gold futures. If oil can go to - 36 then gold could go to 5000 bucks easy
"Unfortunately", they rather take the delivery on metals. If you're going to speculate on precious minerals, uranium are the ones that people does not take delivery and even if they wanted, they can't unless they have the permits to hold them. So, yeah those stuff can go negative value on their futures contract.
LOL yes that would be a major fuck up good point I’ll be watching those next this could be my new fan fact if we see more negatives
With manufacturering too, like steel and stuff, also I hope those hedge funds who have been long on this stuff don’t get bail outs
Dude. The point is, use the future market to predict the spot market. They pretty much tells you what the "future" will look like 😂😂😂 this case for example, future fall to -36, spot market still on 14 dollars. So the next best thing is, you park a buy order at spot market for 7 dollar, and see it bounce right up.
Remember this, it's not life stock. It's not perishable. Crude oil is raw material. And raw material can't go negative. At worst, the oil refinery close down and don't wanna sell you oil. You can go there Rob them and take their barrels at the same time 😂
Other perishable product, like lean hog. If you take the negative contract, it will be worst because next thing you need to deal with, is a truck load of dead pig 🙈 it's like they pay you to get rid of their dead pigs.
Bottom line is, you need to identify and compare the spot market price with the future contract. This oil thing, could be once in a life time. I mean, after yesterday's incident, I don't think there's anyone else daring to speculate the crude oil futures 😂 or they're too busy to arrange transport for their 200 barrels now, and probably for the next 10 months.
Hey @davidke20 Such a nice information you have shared. Now it is bitcoin turn. may be bitcoin will fall as well.
Thanks for comment. BTC itself is a digital asset, so asset is a commodities. BTC itself will not go negative, but SHORT BTC can go negative because it's a contract 😂 you own BTC, you don't need to pay interest as long your wallet can stay offline and maintenance free. But it can go nasty when you short the future contract which needed to pay 6.5%.
https://beincrypto.com/traders-are-paying-6-5-apr-to-short-btc-futures/amp/
i am not saying that bitcoin will go negative. But it can fall badly. Bitcoin is different than oil gold but we can see short term fall.
You're right. But we won't know. This is a good time to test it actually, imagine if someone accepting BTC for food delivery. You may just see crazy spike in value. Or how about buy a car with BTC?
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The drastic fall in oil price actually got everyone astonished most especially the top investors who earned millions from the investment. The sad reality is that most countries economy are highly dependent on oil and there is no doubt that the drop in price may actually affect the their economy too.
You are actually right about this. We can't really do without oil as you've stated but are you also aware that some developing countries are also finding a means to eradicate the utilization of fuel/oil product due to it's increase in pollution.
But is there also a way I could go about investing in oil at this present moment?
Thanks for sharing this great post with love from @hardaeborla in courtesy of @crypto.piotr ❤️💕❤️
Two things. Futures market, and spot market. Futures is a security, buy or sell in advance for a nominated price at a stipulated date. This is the one that causes the native value. You can't take this contract when someone is paying you to own their contract. The clock start ticking once the contract expire! It's a time bomb. Once you take that 36 dollars and the bomb set off, next worst nightmare is, the transporter send you a bill of 500 dollars so they can send you the 40 barrel of crude oil. And next day, 40 barrel of oil unloaded Infront of you house 😂😂😂 I don't wanna know how can you get rid of them, and nobody wanna buy crude oil unprocessed.
Spot market, you never own the oil and never will. The moment you put down the contract, your clock start ticking. This is different than time bomb. This is lethal injection. You'll have to pay swaps(interest). You borrow the oil when you buy; someone borrow the oil you don't have when you sell. But the actual oil price on this market will never go below 0. Check out my last screenshot, enlarge it and you'll see there's negative 5 dollars on each row. That's the amount of swap I'm paying when I BUY. Everyday pay this amount, including weekends and Wednesday pay double 😂
Wow! I never knew there is more to the process. It really means investors are really going through a lot then most especially since there is a drop in price of oil. I was really thinking it works like that of cryptos not knowing it's very different.
Thanks for your lovely reply with love from @hardaeborla 💕❤️💕
If I tell you this is my first time looking into oil, do you believe me? Come join me in my progress as I explore more to this financial tool. The only difference is, we always do the opposites. When everybody sells, we buy. When everybody buys... we'll decide to hodl or sell. The upside is always unlimited, but the downside is 0. So, we can measure the distance and decide.
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It is true that we can't do much without oil and this means that the low oil price is just temporary which will go up after the pandemic and things go back to normal but the truth is that the fall in market price of everything is alarming.
There's two types of market. The current emergency market is due to future contract that is expiring below expected value. Spot market will not go below 0 because, they will not just give away the barrel to you. They will shut down the refinery and we're all screwed.
Hello friend @davidke20, the market is crazy these days, it seems that the least affected market is the crypto market.
Do you agree or am I wrong?
Correct me please!
Thanks for commenting buddy. No right or wrong. Crypto has its craziness. SBD was once 15 dollars, today at less than a dollar, is that crazy? Steem was once 8 dollars, and now less than 20cents 😂
The thing is, if you're not in the future market, the price can never go negative. Things that gone crazy is people. Crypto can go crazy when a solar flare emp take out the entire Blockchain and blown away the entire backup and all server farms. Crypto gone 0. But still, it will not go negative. Agree with me? 🤭