US crude falls to negative value, OPEC looks bad

May crude oil futures in the United States reached their first negative value in history on the 20th, and the market was shaking. OPEC could take early action.

West Texas crude oil closed at $ 18.27 a barrel last Friday, however, as the trade day approached, it closed at less than $ 37.63 on Monday, which is quite alarming. This means that the seller must pay the buyer in order to get out. Since the new coronavirus epidemic, oil storage tanks around the world have quickly filled up and crude oil has nowhere to go.

However, June futures still have a positive value: in the most active contract trade, the 20, only fell 18% to close at $ 20.43, while the more advanced November crude oil futures remained at $ 31.66. These prices still indicate that the market believes that abnormally low prices will not last long. In any case, even if the price of oil returns to $ 30, it is enough to bankrupt many energy companies.

In addition to aviation stocks, the energy industry has once again become the leader in the US stock market. USA, with the Dow Jones Industrial Average sinking 592 points. With surplus crude oil, global offshore oil storage has doubled in two weeks, reaching a record 160 million barrels. However, these circumstances will also force OPEC to take action again.

OPEC will take action

According to the news, the oil production meeting to be held next month may be in advance, and plans to cut tariffs may start, and even this may be too slow to respond. Saudi Arabian state oil companies have indicated that they can cut production by 30% to 8.5 million barrels of crude oil per day starting in May. Of course, this still has some practical obstacles and depends on the relevant laws and contractual issues.

Although the negative value is only temporary, it reflects the uncertainty that the owner does not know how to deal with oil in the short term. However, OPEC, Russia and the United States are expected to have more consensus on production cuts, and the market will also have a more intuitive understanding of the current crude oil crisis. Of course, the current decline in the broader market also includes pessimism about the upcoming financial season. In fact, after the news that oil-producing countries will take action, there is still a 100 point rebound.

It is worth mentioning that market views on prospects are gradually diverging. There are opinions that the stock market has seen the light of the tunnel exit, but there are still opinions that are not satisfied with the government’s rescue measures, which is not enough to deal with the impact of the epidemic. In any case, there may be more confusion in the market in the next month.

(Source of the first image: Flickr / Department of Energy and Climate Change CC BY 2.0)

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