Folks, Let’s Talk MONEY and FUTURES! Short Thread. Unless you have been on vacation somewhere in Jupiter, you must have heard that OIL Futures are trading in Nagative, as in, MINUS! After I tweeted about this anomaly earlier in the day, someone asked that I explain “FUTURES”

A “FUTURE”, is a fancy name for a Commodity Contract. A commodity is a fancy name for raw materials. Most natural resources are traded, aka, sold as “Futures”. Oil, Cocoa, Iron, Cattle, Rice, etc, are all traded as Futures. A Typical Future contract simply says,

“I will buy xyz from you at xyz date at xyz price”. It is just that simple. Futures are forward looking contracts. What this means is that, due to the nature of these materials, they are priced for delivery at a future dates, at the agreed to prices on the contract.

So the Oil you are using today was actually most likely paid for back in December or January.
Now that we all understand what “Futures” is, here is what happened today to Oil.

Imagine going into a store to buy something. Instead of you paying for the item, the Store pays you to buy the item. That precisely is what happened today to Oil Futures. There is a glut of Oil with folks not driving. There’s is no where to store Oil as vendors are not selling.

To make things worse, even at the give away with money added, there are still no, or very few takers! Ships loaded with Oil are pilling up in Oceans around the world with nowhere to offload Oil. With the world shut down, refineries can’t sell what they have.

To add to the misery, Saudi Arabia and Russia are not helping matters with their struggle for dominance. US, being the world’s largest Oil producer, is pumping at furious rates. Marginal nations such as Nigeria are caught in the crossfire with no way out.

Oh, if you are one of those who snagged the negative rate Oil Future, you will be very rich soon. This is an anomaly that doesn’t occur so often. In another Thread, we will look at why Africa is poor and will remain poor for a foreseeable time.

We will also look at the implications and why governments cannot just cut prices for gasoline with Oil futures in Negative. Happy investing and I hope this helps.

Have you ever wondered why the Coca Farmer in Oyo state is still poor? Have you ever wondered why the Groundnut farmer in Kano is still Poor? Have you ever Wondered why the Palm Oil trader in Imo State is still poor? I will explain. Loading