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What happened to oil yesterday was the greatest collapse I've seen in any commodity, ever.
And barring some unforeseen apocalypse, we'll never see it again.
This just doesn't happen in the commodities market. Every once in a while in a stock, sure, you'll get a case of fraud or someone goes bankrupt. The stock will go to $0 over time.
In the commodities world, there's a bottom for prices. This doesn't happen. Until it did.
Oil futures traded at a negative price for the first time in history.
Demand is down. No one is traveling, and global manufacturing has plummeted.
There's a price war. Saudi Arabia drove production way up, and Russia joined them. Now there are estimates of up to 30 million barrels a day of extra oil being produced. Even with a production cut, there will be 20 million barrels a day being produced with nowhere to go.
All that oil needs to be stored somewhere, and the world is running out of places to put it.
Futures contracts are tied to physical delivery of a commodity. Everyone dumped them because they have nowhere to put that oil.
No one wants oil right now.
And that's why this oil story is so troubling - it's very much a demand story, not an oversupply story...
What to Do When No One Wants Oil
An oil trading firm in Singapore, Hin Leong, kicked off oil's trouble. Hin Leong buys and sells large super tankers filled with physical oil to distribute through Asia.
Sunday night, it told the world it had a non-disclosed $800 million loss from trading oil. To cover the loss, it had to liquidate oil futures - a fire sale. It had to sell...
About the Author
D.R. Barton, Jr., Technical Trading Specialist for Money Map Press, is a world-renowned authority on technical trading with 25 years of experience. He spent the first part of his career as a chemical engineer with DuPont. During this time, he researched and developed the trading secrets that led to his first successful research service. Thanks to the wealth he was able to create for himself and his followers, D.R. retired early to pursue his passion for investing and showing fellow investors how to build toward financial freedom.
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