On Monday, the prices of US crude oils slumps down to -$ 40.32 per barrel. The reason for oil prices crashing is an abundance of oil storage due to COVID-19.
As there is a huge storage of oil in the US and global markets. Because there is no use of oil due to COVID-19 and that’s why organizations are not purchasing oil. But Traders want to sell their oil because oil trading is based on “future contracts” which allows buyers to purchase barrels of oil at specific prices.
On the contrary, traders sell commodities in the form of “futures contracts” and these contracts were expiring soon. Now traders were having only two options. The first option was to buy these shares which they have purchased but there was no profit it in and second, was sell these shares at least prices do not have any loss. And traders chose the latter option.
So they dumped the contracts as when it is a minus dollar, so they have to pay Dollar to buyers to get it out of here. And this laid the prices slump down $0 to -40.32 per barrel.
About the Contributor……Dheerendra is a student of Bachelor of Journalism and Mass Communication in the Centre of Media Studies at the Allahabad University. He actively writes many articles on various platforms and paid his contribution to many organizations. If you have any queries regarding his articles, texted him via Instagram @its.dheerendra.