InvestNow News – 1st May – Russell Investments – Key watch points for markets amid grim economic data
25 April 2020 – Paul Eitelman – Senior Investment Strategist
On a special, remotely recorded edition of Market Week in Review, Senior Investment Strategist Paul Eitelman and Research Analyst Brian Yadao discussed the recent historic moves in oil markets, newly released macroeconomic data points and the outlook for first-quarter earnings season.
What drove U.S. oil’s plunge into negative territory?
On April 20, the price for May delivery of a barrel of U.S. West Texas Intermediate crude oil settled at negative $37—the first time in history that an oil futures contract went negative. However, Eitelman noted that very few contracts for May actually traded at negative prices—and that the volume-weighted average price for oil was actually positive that day. “The negative oil prices on April 20 were likely more of a fluke rather than a systemic issue for energy markets,” he stated, adding that prices for June and beyond are still significantly positive.
The overall volatility, however, is reflective of two main challenges confronting the energy market, Eitelman said: weak demand—due to government containment measures to limit the spread of the coronavirus—and last month’s oil price war between Saudi Arabia and Russia. This has led to a significant oversupply of oil, triggering swift and significant declines in prices, he explained.