On April 20, West Texas Intermediate (WTI) crude oil futures shipments in May fell 305 percent to $ 36.73 per barrel during the NY session.
It was a bloodbath. A tip on how market forces of supply and demand shape prices.
Traders and the investment community once highlighted the negative effects of the coronavirus and foreclosures in many parts of the world and parts of the world.
The truth is, it was devastating.
The economy, analysts say, could take years to return to pre-coronavirus levels.
This would also have serious consequences for employment, living standards and worker well-being. Most of them were told to work from home, were told to accept a lower salary and sometimes lose their jobs.
The cost of the obligation?
However, yesterday’s fall in oil prices reveals how cautious traders are. Their risk aversion is based on foresight that, despite the government’s optimism, it will take some time for industry and the economy to rebound. The lower this gloom is delayed, the lower the demand will be.
Meanwhile, the decline in demand, despite OPEC members taking a truce to reduce daily production, does not prevent barrels of millions of oil from flooding the depots. In essence, yesterday’s statement from the market was that oil depots will unload oil as long as there are extra storage facilities at a steep discount.
This upset the market and the price at which the supply of oil from certain sources lost fear at some point. To be clear, it did not affect the oil price of gas pumps per se.
But a lack of supply is likely to reduce the cost of gas and other petroleum products in an immediate timeframe. Understandably, no one wants to sign a contract that can be renewed again by mid-May, or pay huge bills due to a lack of storage space.
“Oil comes with storage costs. Speculators don’t want to get physical barrels of oil. To avoid delivery, they must sell the future before maturity. The global epidemic has pushed oil demand to zero. The oil price war delivered supplies indefinitely. Bitcoin has no storage costs. ”
There are storage costs for oil.
Speculators don’t want to get physical barrels of oil.
To avoid delivery, they must sell the future before maturity.
The global epidemic has pushed oil demand to zero.
The oil price war delivered supplies indefinitely.no storage costs
– James Viggiano (@jamesviggy)
Bitcoin has no storage costs like oil, a perfect storehouse of value
Due to troubles in the oil futures market, experts turned to crypto, son and gold.
Gold has long held the crown as a value constraint, while the USD is also struggling as an alternative, especially in times of crisis.
After today, oil is no longer considered a reliable store of value. The next best options are the US dollar (swallow), gold (little) or Bitcoin (fixed).
– Cameron Winklevoss (@winklevoss)
Their downside is that central bank intervention in USD and the likelihood of an endless supply of gold shine in the strong lights of Bitcoin.
Bitcoin is mathematically controlled and has a known fixed supply. In addition, its usefulness does not depend on consumption.
In reality, the fall in oil futures prices really exemplifies what can happen to an asset, oil, whose demand is based on consumption, which is influenced by other external factors.
The coronavirus can be blamed for this, but the spread and decentralization of Bitcoin has so far offset its effects.
“The recent oil price crash is an example of what can happen if something used as a store of value relies on the consumption of a particular commodity or the fashionability of a commodity. Art, wine, gold, silver and #oil share this quality. Not Bitcoin ”
The recent collapse in oil prices exemplifies what can happen if something used to store value relies on the consumption of a particular commodity or the fashionability of that commodity. Art, wine, gold, silver and share this feature. Not
– Bob Burnett (@boomer_btc)
At the time of the press, Bitcoin is changing hands for $ 6,815, down four percent on the last trading day.