In an incredible market move, the price of a barrel of oil has sunk to levels where you will make money for taking the resource off the market. Oil has plunged into negative price territory for the first time ever due in part to issues in the oil trading nations, as well as the surplus that has materialized from the Covid-19 lockdowns across the globe.
This fall is incredibly dramatic for an asset that is commonly traded and well respected in the global markets. But, it is a part of a greater market collapse that continues to unfold amid the ongoing Covid-19 outbreak. The Bitcoin market has not been immune to this uncertainty as it also experienced a rapid drop, but it has since recovered relatively well.
In saying that, it appears as if the price of Bitcoin is once again reacting to news in the traditional markets as the fall in the oil price has seen Bitocin slip below an important resistance level of $7,000 as it currently trades around $6,800. This fall may well be in anticipation of more bad news to come as Brent Crude is also in danger of slipping in price to zero or lower levels.
Supply and demand
This unprecedented fall in the price of oil has been a perfect storm brewing, but not many people would have imagined it would have gone to below zero in terms of the price of a barrel. The oil market was already under pressure before the Covid-19 impact struck the general markets.
There were concerns between OPEC countries and Russia and Saudi Arabia disagreed on an important decision put forward by the oil-producing countries, This led to the Middle Eastern country deciding to continue producing oil regardless of what was wanted by the group, leading to an oil glut and an intentional lower of prices to impact Russia.
However, the oil glut came at a time when the markets were starting to collapse which further pushed down the price of the resource. Now, as the world has been in lock down for a number of weeks, the demand for oil has dried up even more as there is less need for fuel with businesses closed and people not driving.
The fact of the matter is that the storage facilities for oil are full, and the continued oil production means there is no place to store this, so it is worth less than nothing.