The economy is so broken that oil futures entered negative territory. It didn’t just dip into negative territory, it hit close to negative $40!
CNBC:
A futures contract for U.S. crude prices dropped more than 100% and turned negative for the first time in history on Monday, showing just how much demand has collapsed due to the coronavirus pandemic.
But traders cautioned that this collapse into negative territory was not reflective of the true reality in the beaten-up oil market. The price of the nearest oil futures contract, which expires Tuesday, detached from later month futures contracts, which continued to trade above $20 per barrel.
West Texas Intermediate crude for May delivery fell more than 100% to settle at negative $37.63 per barrel, meaning producers would pay traders to take the oil off their hands.
There is simply no demand for oil as a result of countries shutting down their economies. On top of that you have a tremendous supply of oil available which is why this situation now exists.
At least we’ll have some cheap gasoline for a little while. But that doesn’t really mean much considering the rest of the global economy is in a state of total collapse.
This is obviously completely insane but indicative of the deflationary environment that we are entering into. I expect similar things to happen with real estate and other assets when things finally open up a bit.
The central banks will undoubtedly respond to this by dumping more money into the system which could eventually result in a hyperinflationary scenario. Even though I do not have a crystal ball, that seems to be where all this is heading.
Mike Maloney offers some more detailed analysis of this subject in his latest video. I believe he is right about this being a major economic event that could kickoff revolutions and wars. Oil is the lifeblood of many countries and those countries that have centered their economy around oil are going to have major problems in very short order.
