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Oil Futures Drop

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Another year goes by and crude oil prices have once again increased. Given how fast events have moved since, with whole countries in lockdown mode , current forecasts point to demand declines of as much as 18-20 million barrels in April alone, and by as much as 20 million bpd in terms of global call on crude for all of 2020, according to the International Energy Agency.
The price of oil, or the oil price, generally refers to the spot price of a barrel of benchmark crude oil —a reference price for buyers and sellers of crude oil such as West Texas Intermediate (WTI), Brent Crude , Dubai Crude , OPEC Reference Basket , Tapis crude , Bonny Light , Urals oil , Isthmus and Western Canadian Select (WCS).

Where once the U.S. exchanges held a virtual monopoly in offering commodity and futures exchange contracts, they are now faced with fierce competition from various exchanges in other countries and the entrance of new players onto their domestic soil.
According to Ambrose Evans-Pritchard , in 2014-2015, Saudi Arabia flooded the market with inexpensive crude oil in a failed attempted to slow down US shale oil production, and caused a « positive supply shock » which saved consumers about US$2 trillion and « benefited the world economy ».
Because the crude oil industry has developed hardly at all in recent years due to a lack of investment capital for discovery, extraction and further processing, global production can barely meet the high demand for crude oil from countries such as the USA, China or India.
Largely because of passage of the Commodity Futures Modernization Act of 2000 (CFMA), there are exchanges all over the world that oil-futures will allow you to trade on various future events, like presidential elections, greenhouse gas emissions, and the weather.

As global oil storage capacity fills up, including on emergency floating facilities, the lack of storage will backfire on the Saudis and Russians, as both opportunistically seek to lock in and steal market share from one another by cranking up their oil production spigots.
The welcome news on oil prices, which have been plunging since the beginning of the year and causing woes for energy companies, overshadowed another report showing the coronavirus outbreak is forcing millions of Americans into the unemployment queue by the week.

The NYMEX WTI Light Sweet Crude Oil futures contract (CL) trades in excess of 10 million contracts per month, offering superb liquidity However, it has a relatively high risk due to the 1,000 barrel contract unit and01 per barrel minimum price fluctuation. There are dozens of other energy-based products offered through NYMEX, with the vast majority attracting professional speculators but few private traders or investors.
Prompt prices are lower than those in future months in a contango market amid a supply glut, encouraging traders to store oil for future sales. Futures trading is somewhat different than the traditional buy and hold investing. Saudi Arabia, for its part, needs oil at a whopping $85 per barrel to balance the its national fiscal accounts, according to the International Monetary fund (IMF), while Russia needs prices in at least the mid $40s.

But whether that can support prices that have fallen by more than half this year as the coronavirus crippled the global economy is questionable. For NYMEX crude oil futures, the current margin maintenance requirements range from $2,900 to $3,400 depending on the date of the contract.

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