There’s no doubt that we’re living in strange times. That fact was brought home in recent days when the May contract for WTI crude oil fell to a low of negative $37.63.
Yes, they were paying you to take the oil.
The problem was that storage facilities around Cushing, Oklahoma were essentially full to the brims, with no place for the oil to go. So longs who had held onto their May contracts were going to be forced to take delivery, yet they had no way to do so.
That’s why they were willing to pay someone, anyone, to get them out of their contracts.
This remarkable situation highlighted the crazy days we’re having in the world, in the financial markets and in the commodity markets.
The global economic slowdown has been a virtual halt. Demand destruction has hit virtually every commodity…with the notable exception of gold. Demand is soaring for gold as investors around the world anticipate the repercussions of the stimulus tsunami.
But the situation in oil also highlighted the differences in the futures markets for both commodities.
In oil, the longs are being forced to accept oil that they have nowhere to store. In gold, the shorts will be forced to provide gold they have nowhere to find.