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Oil price turmoil set to continue

Oil price turmoil set to continue

Negative oil prices on Monday were a “quirk”, says one market expert.
The price of US oil – which slumped to minus $37 at one point – was produced by a trading deadline and is now back close to a positive figure.The UK oil price has been hit too, but the price of a barrel of Brent crude is now at about $23.

“Yesterday’s price action is best understood as a quirk or peculiarity of futures trading,” said analyst James Trafford of Fidelity International.

He reckons the unprecedented price movement confirms that near-term demand is very weak, BBC reported.

“But it isn’t cataclysmic,” he said. “We don’t see negative oil prices as a new normal, going forward.”

Oil prices have weakened sharply because of a combination of oversupply and a collapse in global demand due to the decline in economic activity cased by coronavirus lockdown measures.

What happened?The price of oil that we see reported is actually the future price of oil. Futures are essentially contracts to deliver the physical commodity at a later date.