Due to popular demand, negative oil prices have been explained through this one minute animation and viewers will be given the full perspective: from the demand shock variable to the rule futures market “fine print” played in the negative oil price equation.
Right off the bat, people need to understand that oil is not gold for a wide range of reasons, from the fact that a lot of storage space is required to the property deterioration dimension.
As such, the idea that negative oil prices appear as a production deterrent should not be considered outlandish. Instead, think of it as the market simply making it clear that oil demand has plummeted and as such, that market participants need to tone it down a notch or two in terms of production.
It is extremely important to get your facts straight by understanding what 2020’s negative oil price episode did as well as didn’t tell us. Make no mistake, harsh lessons need to be leaned but as explained in this video, we need to make sure they’re… well, the right ones 🙂