Oil and Energy’s Future Amidst COVID-19 Crisis

Last week, the US oil market experienced negative pricings for the first time ever, spanning two full days; a historic moment for the industry, one that will be remembered for the foreseeable future.

Many brokers had taken into account the risks that the COVID-19 would produce, and had taken the appropriate measures, yet few, if any, were prepared for the events of Monday (20.04.2020), when the price of U.S crude oil set for a May delivery fell to an all time low of -$40 per barrel.

This hit was most felt by the West Texas Intermediate (WTI) Crude. Reports state that production exceeded the storage capacity, simple leaving the producer of the crude commodity with no place to store it.

However, since the dreaded Monday, we have seen a rise in stabilization in oil prices, yet it is too soon to conclude anything. Experts say that WTI futures for June may follow the same pattern as the one we say in May. The cause of this is the lock-down of a significant percent of working people, because of which demand for oil will be at an all time low.

Yet, brokers and traders alike are preparing for the next wave of market shock, which some forecasts are predicting to hit energy commodities. We are currently entering a period where the demand of energies will lower because of the approaching summer season. Yet, we must consider the current virus epidemic as the biggest prerequisite of any future energy market volatility.

Brokerage firms have implemented measures to try to contain the historic crisis, in order to protect themselves and their clients. Procedures include the closure of trading positions on behalf of clients, raising margin requirements, rendering affected assets inoperative, etc.

What the long term consequences of these dilemmas are uncertain. Time is the biggest tell here, but also each individual's dedication to beating this epidemic.