In an economic first ever, the world saw negative oil price contracts come to pass. Many people, especially futures market traders, are hoping that this is the end of such abnormalities, and that life would “go back to normal”. but now Zero Hedge is reporting that there may be a second round of negative oil price contracts, which would absolutely destroy the global economy even further than what it has already been.
As Bloomberg and Dnyuz reports, the Commodity Futures Trading Commission will advise exchanges to monitor their markets and remind them to “maintain rules to provide for the exercise of emergency authority”, including the power to “suspend or curtail trading in any contract” if markets become disorderly, according to an advisory notice to be released on Wednesday.
“We are issuing this advisory in the wake of unusually high volatility and negative pricing experienced in the May 2020 West Texas Intermediate (WTI), Light Sweet Crude Oil Futures contract on April 20,” says the eight-page advisory signed by the CFTC’s heads of market oversight, clearing and risk, and swap dealer and intermediary oversight.
Clearing houses “should prepare for the potential that certain contracts may experience significant price volatility, and that negative pricing is a possibility”, the advisory said adding that “we are issuing this advisory in the wake of unusually high volatility and negative pricing experienced in the May 2020 physically-delivered WTI contract, and related reference contracts.”
The alert comes after the US benchmark West Texas Intermediate oil contract plunged below $0 a barrel last month for the first time, as buyers searched for places to store a glut of oil.
The WTI contract for June delivery is scheduled to expire next Tuesday, raising the prospect of a repeat of the chaotic final two trading days in the May oil contract, which settled at minus $37.63 a barrel on April 20.
The move caused losses for countless retail traders and at least one futures broker, and sparked widespread criticism of an oil benchmark referenced by drillers, refiners, consumers and investors.A senior CFTC official said its notice applied to all contracts, not just oil, and did not represent a forecast that negative oil prices would return. “We are not predicting the market. We’re just suggesting planning,” the official said.
Brokers “should prepare for the potential that certain contracts may experience significant price volatility and, possibly, negative pricing,” the CFTC said. (source)
I am going to warn anybody paying attention: this is the new normal.
The biggest change happened as a part of the now somewht-forgotten COVID-19 stimulus check. Far from just paying out money to people, the checks had a bigger implication for business, which as I have reported (along with many others) is that the government did two things. First, any loans or bailouts given to businesses allowed the government to take a financial stake- i.e. owner -in the company. Second, was that the government started immediately bailing out under the same program countless numbers of insolvent businesses, making them solvent when they otherwise would have failed.
This was the big change that happened which everybody missed, for while the masses were whining about either “free money” or “who is going to pay for this”, the government by way of money printing, and specifically the Federal Reserve Bank, made an economic change to soft fascism.
How could it be fascism? Simple. The definition of fascism is the merger of state and corporate power. By way of debts and bailouts- a process began in late 2007 -the US formally took control of corporate power and the stock market using money printing and debt. Corporate power has been fully merged with state power.
This is why many stock traders are saying the markets no longer exist, and that trading now will mean (in order to be successful) just picking the companies chosen for bailouts by the government, since the government will not let fail that which it has chosen to win, and they can always print the money to ensure a victory. The market is not just partially rigged, but openly rigged. There is no point on playing at a casino with a rigged game unless one always plays on the rigged side.
This is what happened with the oil contracts. Contracts simply do not “go negative”. It was rigged that way, and for the purpose of geopolitically undermining China and Russia. Financial investors? Only if the matter to the government. Otherwise, get on the train or get out of the way because any differences will be crushed.
Welcome to fascism. It’s not hard to understand, and if one thinks that the situation is bad now, just wait for a few years from now when the economic problems get worse.