ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Why and How Crude Oil Price Became Negative?

Crude oil price becoming negative is one of the rare events that happened after World War II in the energy sector. The real reason for oil prices to move into sub-zero level is not attributable to supply–demand mismatch, rather it owes to the timing of this movement and specifically what is popularly known as the “day-of-the-week effect.” Though India is importing almost 82% of its oil, falling global crude oil prices are not going to benefit the end users much. But, the interaction effect of the lower crude oil price with COVID-19 is definitely going to have an impact on the country and investors.

 

When the news about the oil price going into negative came out, many investors were happy and many were confused. Memes started floating on social media that if we buy petrol, petrol bunk owners are going to pay customers, etc. Actually, crude oil price reaching sub-zero level is one of the rare events and a theoretical concept, which we often discuss in a derivative course. Let us discuss the nuances and see how and why crude oil price became negative and what is its impact.

All Crudes Are Not the Same

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Updated On : 19th Dec, 2020

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