For the first time in history, oil prices crashed into negative territory, given the lack of demand due to Coronavirus and oversupply in the market.
There are billions of people across the globe that are staying at home, as part of government lockdowns to slow the spread of the coronavirus, resulting in physical demand for crude drying up, creating a global supply glut.
In terms of the negative pricing frenzy, well, traders in the futures market, fled from the expiring May U.S. oil futures contract, with no place to put the crude.
Note that, in a futures contract, a buyer will typically be paying some money down with the promise that they would be taking delivery of a particular commodity or security on the day of the contract expiry.
Speculators that are trading these contracts, of whom do not intend to take physical delivery of a commodity exit the position before the day of expiry, only those who intend to take actual delivery of the commodity to stay on till the end.
Anyone who still had the contract on Tuesday had to take physical delivery of the barrels of oil from Cushing, Oklahoma.
What does this all mean for the broader markets?
In the FX space, a wave of buying pressure has been seen in the safe-havens, such as; USD and JPY, very much been in play since the Asian session. Elsewhere, stock indices have been within the control of the market bears, understandably given the cross-asset class uncertainty.
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