Energy ETF, Stock Gainers Even as Crude Crashes to Below Zero
Zacks Investment Research | Apr 20, 2020 10:10PM ET
Oil prices collapsed to below zero for the first time in history with buyers avoiding delivery of physical crude. The economic turmoil caused by the coronavirus crisis has resulted in crashing demand and rising stockpiles.
Notably, the price of the West Texas Intermediate crude oil futures May contract crashed by more than 300% to just -$40.08 per barrel at one point on Apr 21. The selling had WTI on track to close at its lowest level since recordkeeping began in March 1983, according to Dow Jones Market Data. A negative price suggests that sellers were paying buyers to take deliveries in a bid to avoid incurring storage cost.
Meanwhile, the June contract dropped 18% to $20.43 per barrel. This has created a huge contango (the front-month contract is lower than the next-month contract) in the futures market, which indicates an oversupply condition.
Efforts taken by the OPEC and its allies to cut oil production by 9.7 million barrels a day starting on May 1 through Jun 30 to balance the oil market have not been able to lift the sector’s sentiments (read: Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
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