Historical Movement In Oil – May WTI Oil Plummets To Uncharted Territory
For first time ever, oil prices have fallen below £0. In fact, as the market plummets, a barrel of oil is now less expensive than your cup of morning coffee. This historic low for one of the world’s most important fossil fuels has investors concerned, and for good reason. Since the beginning of the year and the onset of the coronavirus pandemic, oil prices have been falling, but the April 20 price collapse is taking WTI oil into new, and deeply uncharted territory. Some crude oil stocks dropped to about £40 below zero.
Why are we seeing such a downward trend from one of the largest global industry’s? The coronavirus pandemic has significantly reduced fossil fuel usage throughout the world, which has caused oil prices to plummet and storage tanks to fill up with the unused oil.
Bloomberg Business reporters have stated: “With no end in sight, and producers around the world continuing to pump, that’s causing a fire-sale among traders who don’t have access to storage. People are trying to get rid of the oil and there are no buyers.”
While many investors were shocked to see prices per barrel fall, energy experts are cautioning people to look at the big picture:
The May contract has expired, leaving many distributors with 1,000’s of barrels of oil that they are unable to sell. This means that they have to sell at whatever price they can get because they do not have the ability to take physical delivery of this excess stock of oil. Storage and refiners are not buying.
With that being said, the rest of the forward curve has not crashed. Yet. The curve is still down, but the contract for June and July delivery is still at a much higher price. While storage is fully contracted at the reduced price, we are still unsure as to what will happen in the future.
Oil Isn’t Valueless, Yet
As all of this is very concerning, it doesn’t mean that oil is valueless, yet. There is an extremely limited number of actual physical barrels being traded at these prices, and investors are encouraged to tread lightly, but tread, nevertheless. That means contacting a London asset management service that can help them understand the current oil situation and how to take advantage of it.
Contact Quadriga Asset Management
To learn more about London asset management service and how it can help your business grow and become sustainable, contact Quadriga Asset Management and speak to an asset management professional who can create a strategic asset management plan to suit your needs and the needs of your business.
If you enjoyed this article, please feel free to share it on your favourite social media sites.