Stores almost never pay buyers to take their goods away, except in very rare cases like what just happened in the US crude oil market on April 20.
Futures contracts usually have a term.
Many people buy oil futures contracts to speculate.
Oil producers are currently finding it difficult to find storage space for their products.
Besides, in the current situation of plummeting prices, speculators face two choices – sell at a loss or find a place to store oil and incur additional storage costs when the contract expires.
The second group are organizations with real needs, such as oil refineries or airlines.
However, when the pandemic caused demand to drop unprecedentedly and storage facilities became increasingly full, the need to buy oil was no longer there.
That’s why yesterday’s oil price fell below zero. Oil producers are willing to pay to push crude oil away, because no one needs oil right now, when the whole economy is on blockade.
Francisco Blanch – Director of Commodities at Bank of America said that with a normal mechanism, consumers will buy when prices fall.
In the past 2-3 months, every day about 30 million barrels of oil had to be stored in storage due to falling demand.
The price of oil delivered in June is currently above 20 USD per barrel, not yet negative but also falling very rapidly.