The impact of the oil price slide

Published on: 23-Apr-2020
Category: Trading
Last updated: 23-Apr-2020

The impact of the oil price slide

The oil market got into chaos earlier this week due to negative prices. The American light oil grade WTI cost almost minus $ 40 a barrel. Now the effects of the historical drop in prices on the markets are showing. The price of the WTI variety has now recovered to $ 15. But the North Sea oil Brent also reached a historically low price, which was last seen in 1999. It fell below $ 16 but was also able to recover and is trading at $ 22.

The reason for the extraordinarily low prices is the current surplus of oil and trading on futures markets. The bearings are full and nobody wants to buy oil anymore. If investors have bought oil for speculative reasons, they must sell it again by the end of April, otherwise they would have to physically take it off in June. As a result, the stricken oil price got the last blow and finally even fell into the red.

The current situation on the oil market benefits consumers. Gasoline prices are falling even further than they have been since the Corona crisis.

The fact that the price of American shale oil is rising again is partly due to Donald Trump. Due to an open sea incident, Trump has tweeted that the U.S. Navy will destroy Iranian ships if they stand in the way of the American. This threat helped the WTI price out of its downward vortex. But the descent is not over yet. The price of the Brent variety can also approach the zero-dollar mark. If the corona crisis continues and storage capacities become scarcer, the surplus will increase and the price will drop.



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