In the early morning of April 21, Beijing time, U.S. crude oil fell into the negative territory unprecedentedly, and the NYMEX May contract closed at an eye-popping -37.63 US dollars per barrel, a drop of 305.97%. Foreign sources said that the rapid reduction of oil storage space in the Oklahoma warehouse, an important crude oil delivery place, prompted traders to sell aggressively.
Some analysts believe that even if US crude oil falls into negative territory, it will have little impact on the market and has nothing to do with the financial crisis. A serious mismatch between supply and demand, depletion of superimposed storage space, and impending delivery are the main reasons for the plunge in front-month U.S. oil futures contracts. It shows that the bulls in the market have no place to put it, so they are unwilling to accept the goods no matter how cheap they are, even if they are given to you for free. Because the cost of finding storage space is too high, the bulls collectively stampede to close their positions. April 21 is the last trading day of the U.S. Oil 05 contract. Therefore, many bulls who do not plan to take delivery have to close their positions regardless of cost before this date, which leads to the occurrence of negative value events.
Despite this, negative oil prices inevitably brought a certain amount of panic to the financial market, and the three major U.S. stock indexes fell together that day. On April 21, domestic commodity futures turned green at the opening, and Zheng cotton futures fell sharply. As of the time of writing this article, Zheng Mian’s main CF2009 contract has fallen to the price of two weeks ago. However, so far, Zheng cotton is still within the consolidation range of the past two weeks, and the trend is relatively stable. After all, the cotton market is significantly different from crude oil, which has nowhere to go.
For cotton prices, the most critical factor at this stage is demand. In recent times, the growth rate of new confirmed cases of COVID-19 around the world has slowed down, various countries’ anti-epidemic measures have begun to take effect, and many countries have begun to try to relax blockade restrictions. The market believes that the appropriate relaxation of blockade restrictions indicates that global economic activities are about to recover, and the demand for textile end products will also recover. At least cotton consumption is already on the road to recovery. Although the dark moment is not over yet, for the futures market that reflects the direction of consumption changes in advance, the worst period has passed, and the strong external market trend will provide support for the stabilization of the domestic market.
However, when market sentiment is warming up and consumption is tentatively recovering, the market cannot be blindly optimistic. It still needs to be wary of unpredictable black swan events and sudden changes in external financial markets, and take relevant countermeasures. Maintaining the status quo. </p
