With demand affected, oil futures plummet in the face of imminent contract expiration

English Apr 20, 2020

On Monday (20), the prices of oil futures contracts plummeted, reaching an unprecedented drop in history of -305.97%, ending the day at - $ 37.63.

The frightening decline can be explained by the large existing reserve, which is accumulated on the market supply side, and the imminence of the contract's expiration, in a situation where the entire economy is forcibly stopped, with reduced demand due to pandemic, which keeps people at home, resulting in melting prices.

The impact of such a fall must have resulted in billion dollar losses for many American funds. Due to the exposure of other assets in the portfolios of these funds, or traders, who trade in oil futures, it is common for a cascade effect to occur and affect other markets. This time, one of them was bitcoin, which saw a drop of about 5% in its price.


Morel Hernandes

Writer passionate about politics, economics, blockchain and crypto-currencies.