- Oil dropped into negative territory on Monday for the first time in history as an unprecedented drop in demand and fears about storage caused prices to tumble.
- After falling to as low as $-40 per barrel Monday, prices rebounded a little Tuesday, with West Texas Intermediate trading at some $-4 barrel in morning trade.
- Brent crude, the international benchmark also saw prices tank to below $20, dropping to its lowest level in almost two decades.
- Analysts were confounded by Monday's shocking moves, and were quick to react.
Markets Insider rounded up some of the most interesting reactions below.- Track the price of oil live with Markets Insider.
US oil prices remain in negative territory Tuesday after dropping below zero for the first time in history on Monday, with some analysts warning that the same sort of crash witnessed Monday could happen again in a month's time.
WTI fell by more than 321% on Monday and fell from about $18 a barrel in early trading to $-40.32 a barrel at its lowest point. As of around 8.30 a.m. ET Tuesday it traded at around $-4 per barrel.
Lack of storage options, particularly at a key storage facility in Oklahoma, and the reduction in demand for the commodity during the ongoing coronavirus pandemic has tanked prices in recent days, culminating in Monday's stunning fall.
The shocking developments in the oil market in the past few days have confounded any expectations and left analysts and traders scrambling for answers.
Markets Insider decided to round up some of the most interesting and insightful reactions from analysts about the unprecedented collapse.
Check them out below (we've highlighted some key points):
Jim Reid, research strategist at Deutsche Bank
"We saw one of the more remarkable moments in financial history and that is a deeply negative oil price — that is paying someone to take delivery.
"This move is all about supply and demand. American energy users and refiners do not have the storage capacity given all that is going on."
Naeem Aslam, chief markets analyst at Avatrade
"The oil volatility is likely to remain exceptionally high in the coming weeks. Oil volatility jumped more than 270% and touched the highest level in its trading history yesterday."
"Prices in the June contract are still somewhat stable, but the fear is that the June contract is likely to face the same fate because the storage remains full and retail investors have panicked as a result of this."
"The silver lining in the whole of this situation is that the oil production is likely to fall rapidly and it is highly likely that we will see this news hitting the headlines in the coming days. "
"This will set the stage for higher oil prices. Moreover, during May, we are likely to see some demand coming back and this should help to balance the demand and supply equation."
Florian Thaler, chief executive and oil strategist at OilX
"The main problem is that WTI is landlocked. Storage space is running out quickly and the Oklahoma storage centre will be full by May. In order to alleviate the situation, price has to adjust or we can only do one thing, try and cut oil production."
"It was quite surprising that the May contract was that low trading significantly lower than the June Contract. The June contract probably follow the same route."
Carl Larry, performance director at Refinitiv
"This move happened too fast and went too far to rely on simple fundamentals. If we were to examine the theory of oversupply, we should have seen the second month of crude oil futures feeling a similar impact."
"As it settled, the difference between the front month contract, CLK0 and the CLM0 was out to the tune of -$58.06. Once again, May Crude Oil Future settled $58.06 below the June Crude Oil Future. To note, the June contract is due to expire in about three weeks from now."
"What is the reality is that these moves in the oil futures were similar to COVID-19 and it's larger economic effect, they are unprecedented. The only explanation that can be believed today is that it happened and it's likely not to happen again in some time."
Gregory Perdon, co-chief investment officer at Arbuthnot Latham
"I have always thought of oil a little bit like a currency; it stores value, is controlled by world leaders and makes the world go round."
"But yesterday was a wake-up call and investors would be remiss to ignore that low oil means lower inflation, higher defaults, lower growth and more political instability as less petrodollars circulate in the system."
Christopher Haines, oil analyst at Energy Aspects
"The key for the US is that there is some kind of indication that demand is going to improve. Without that there we are not going to get a stock drawdown and we are going to have similar price action by the expiry of every contract."
"The exact thing will happen in June if there is no strong indication that the US
Simon Brett, chief investment strategist at Parmenion
"Covid 19 has resulted in huge swathes of the world population being in lockdown. Unable to spend any potential savings from lower oil prices the fall in is of limited benefit. Think of the commuter who is not traveling and the airline that is not flying."
"Looking further ahead to when economic activity beginning to resume, a lower oil price will help keep inflation low. There has been talk that with governments expanding the money supply and increasing debts, plus if there shortages post Covid, then inflation will become more of a problem. "
"Indeed higher inflation will erode the value of government debt. However given that oil is widely used in the production of goods, is a cost in transport and heating, the current low prices should all else being equal help to reign in any incipient inflation."
Giles Coghlan, chief currency analyst at HYCM
"Should COVID-19 be effectively resolved in the coming months, a rise in demand could result in the WTI recovering in the short-term. However, if we consider a long-term trajectory, supply is likely to remain elevated and oil prices will remain low. This could also symbolize be the beginning of the end for fossil fuels as the market looks to greener alternatives."
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