Posted on: April 26, 2020 Posted by: Rushik Gajjar Comments: 0
crude oil crisis
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What does it means when crude oil goes negative ?

We know everywhere is confusion of negative crude oil price. Why this occur and what does it means ? Such that you thought something critical and thinking many ideas and imaginations about it. Let`s get some solution of our questions.

Now, If you think let’s go for fill full of petrol tank of our vehicle and in return petrol pump give you some money to you.

That does not mean, the crude oil rate shows negative let`s buy it for free !

Why Crude Oil fell Down To Negative ? 1
Negative prices means someone with a long position in oil would have to pay someone to take that oil off of their hands – Next Web News

When the price of oil goes negative, it means it’s less than worthless. In fact, some traders and even producers might actually pay people to take oil from them.

As sellers scrambled to dump May contracts, futures prices nosedived and plunged below zero for the first time. Those price at negative $4.47 per barre mean that companies must now pay a buyer to take oil off their hands and store it if they want to exit the market

“Throughout the rest of the U.S., in Canada and then across the rest of the world, there’s still a lot of capacity out there for storage,” Hall said. “Tanks are relatively full and have been filling, but there’s still a lot of room to grow globally.”

In simple way, the seller have too much stock has produced then they can not keep it at own place or storage. There is full of store by produced stock. they need to spend it or sell to buyer for now.

“It feels like high noon on oil markets,” says Norbert Rucker, an analyst at private banking group Julius Baer. “Storage close to capacity limits, rapidly filling up, creates a blistering tension filled with fear about an overflowing oil market.”

MCX fixes April crude interim settlement price at ₹1 as US oil turns negative

This is the first time since 1980s when such a call or provisional pricing has been implemented.

What is MCX crude oil ?

It is an online platform wherein commodities like gold, silver, lead, copper, zinc, crude oil, etc. are traded. MCX has its headquarters in Mumbai and started to function in 2003. It is the largest commodity futures exchange in India.

“Due to the unprecedented price fluctuation in the international markets in crude oil, the due date rate for crude oil futures contract expiring on April 20, 2020 is under finalisation. In the interim, the provisional settlement price for April 20, 2020 is considered as Re 1 per barrel for the computation of members’ obligation for trade date April 20, 2020. The differential settlement, if any, on fixation of the final settlement price shall be done subsequently,” said MCX in a circular.

MCX is currently negotiating a price with brokers and is also consulting SEBI.

Why Crude Oil fell Down To Negative ? 2
SEBI – Securities and Exchange Board of India – Next Web News

“The crude oil futures contracts expired on April 20, 2020 are also being settled on New York Mercantile Exchange WTI crude oil front month contract’s settlement price (i.e. -$37.63) converted into Indian rupees (RBI USD-INR reference rate: 76.6335) and rounded off to the nearest tick,” MCXCCL said in a statement.

Could the crude oil market bust spell trouble for high-flying U.S. stocks ?

There is a some question are asking as the disconnect between downbeat commodity values and high-flying equities in the past month puzzles investors trying to figure out which market will ultimately prove right on the U.S. economy.

“You have many markets that are very much looking through this near-term malaise,” said Chris Hoffmann, portfolio manager at Thornburg Investment Management

The exchange said that crude oil futures contracts are traded in MCX for the last 15 years and the said contracts are always settled at due date rate as specified in the contract specification, i.e NYMEX WTI Crude Oil front month contract’s settlement price converted into Indian rupee.

“The oil market is on its knees,” said Tim Magnusson, senior portfolio manager for Garda Capital Partners

“It shows us that the reality of demand destruction in the economy is more dire than what other risk asset prices, particularly U.S. equity prices, reflect,” said Lauren Goodwin, economist and multi-asset portfolio strategist at New York Life Investments.

Is It Right Time To Buy a Crude Oil ?

Every investors has thinking of crisis of crude oil. there is such simple and logical question is that can we buy it now and get some more profit ?

So, let`s talk about it.

The best time to buy a stock is often when no one else wants to. simply we can say that when demand comes down is that a great time to invest for future profit.

The World’s Biggest Investor Warren Buffett says, When everywhere the market is running low, we should ready for invest and sell it when it goes up.

Why Crude Oil fell Down To Negative ? 3
Oil and gas are attractive sectors to both day traders and long term investors as they provide active and liquid markets and can also serve as a portfolio diversifier and inflation hedge Next Web News

Globally, West Texas Intermediate crude oil fell 4.61 per cent to $15.74 per barrel and Brent Crude slipped 2.72 per cent to $20.75 per barrel in New York.

Brent crude, oil’s international benchmark, traded as much as 6.4% higher to $22.70 per barrel.

The coronavirus crisis led to an unprecedented collapse in demand for oil and U.S. prices have rapidly fallen over the past week. 

Energy stocks fall into that unloved category right now oil prices are getting hit by a supply/demand imbalance, the push for ESG investing, and concerns about a global slowdown tied to the coronavirus.

“The next catalyst will be inventories hitting capacity limits. The way you will know that is through satellite imagery, because the data isn’t available outside of the U.S.,” Craig told CNBC.

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