Oil price in USA, for the first time in history, plunged into negative US$37.

FUTURE CONTRACTS

You must be wondering, how can oil price goes to negative?

Since I was previously primarily in the Oil and Gas industry, I remember 2008 when Oil hit $147 per barrel, and now it is worth nothing.

How can it be?

To explain, Oil is a commodity traded on its future price. This means that you can buy Oil contracts now but the delivery is in May, or in June, or in July. Each contract trades last a month.

CONTANGO

Another term which you probably needs to know is Contango which is the current oil situation. Contango means the price of spot price is lesser than the forward futures’ price. This means oil is expected to be more valuable in future, when demand rise again. Currently there is a huge contango, meaning the front month oil price compared to the second...