April 24, 2020

Nice example on how crude got negative

Imagine the following...you pay $500 today and commit to receiving a prostitute at your house in 15 days. Cos your wife is traveling. This is called a futures contract. 

Unfortunately, lockdown came and your wife will be home for the next 60 days. 

You do not want this woman to show up at your house at all and try to pass this futures contract to someone else.

Only you cannot sell this commitment because nobody can receive the prostitute at home anymore. Everyone is in full storage (their balls) with wife.

To make matters worse, not even the pimp (Chicago Mercantile exchange) has more room to receive girls because his house is crowded with girls.

So you will pay anyone just to take the girl off your hands.

Do you now understand why oil has a negative price when the contract is delivered?

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