Crude Crash Continues
By Eliman Dambell
Crude oil hit a 20 year low in trading on Wednesday as airline companies continued to shutdown operations. With flights being cancelled the world over, a huge proportion of Oil demand has essentially faded. The COVID-19 pandemic has meant demand for the energy is close to being non-existent as domestic and overseas travel has slowed. The fall which has come over the course of the last few months has meant we are now $10 away from seeing a potential all-time low. So what has caused this decline within Oil prices, and what does the road ahead look like?
How did we get here?
6 years ago today, Oil was trading at a price of around $104 per barrel.Then a sudden sell-off, saw the energy reach a low of $44 in 2015, where it consolidated for a year, before falling to a low of $26. Since then, crude has ping ponged in between the $30 and $60 price range.
Recent events with OPEC have added on to the price decline as we have seen the price of Oil reach levels not seen in several decades. After Saudi Arabia recently decided to double down on the it’s supply, now producing over 10m barrels per day, whilst also cutting prices in the process. Many believe this act was done to get in front of the curve, and potentially stem the bleeding caused by the situation with the Coronavirus. However this decision which came without the agreement of other high producing Oil nations has seen the beginning of what many are calling a price war.
What does this mean for Oil Traders?
Essentially we are seeing levels of volatility not seen within any market for a generation. Aside from Oil, the price of Gold, Stocks, Cryptocurrency has all seen significant price hikes over the past few weeks. In respect to Oil prices, the below chart shows the magnitude of what is taking place.
With prices at current lows, the hope from OPEC members would have been that this will ultimately see the demand increase. However as nations the world over are entering states of emergencies, and full blown lockdowns, Oil has become one of the least desired commodities in the short term.
In respect to the longer term however, the hope remains that there will be the possibility for markets to rebound, as we have seen throughout history. If and when the world starts to operate with somewhat of normality, those who invested now, maybe the benefactors of owning the commodity when prices were at these levels.
Irrespective if the view is short term or long term, one thing cannot be denied. Which is that markets are moving, and moving rapidly. Opportunities, for better or worse are being created due to the panic people are experiencing the world over. For those who are trading in these times, there has probably never been a better time to be in the markets, however for humanity, the darker days may still be yet to happen.