Yesterday saw the price of crude oil go negative for the first time in history. You might be wondering how that works? It comes down to an oversupply and under demand.
Traders fled from expiring U.S. oil futures contracts due to the lack of storage facilities around the world coupled with unprecedented low demand. A futures contract is an agreement to buy or sell an asset at a future date at an agreed-upon price. In this case the holder of the contract has to physically deliver their oil at the end of the contract date. With refineries processing less and world oil storage at full capacity, there is simply nowhere to put the product. Thus we saw investors paying to have their oil taken away. It's really a perfect storm of sorts.
Does this mean we will see a drop in prices at the pump? Hard to say. Gas prices have come down with the national average at $1.81/gal (according to AAA), down from $2.15 a month ago. This situation could make those (hopeful) family camping and road trips this summer a bit more affordable, but only time will tell.
Reaching out with an offer to help.
I realize we have all been affected by this crisis and Jodie and myself are here to help in any way. If you’ve lost your job or somebody in your family has lost their job please have them reach out. We have had many discussions and have been closely monitoring the resources available locally. Please don’t hesitate to call with questions, concerns or to just chat. We’re here.
Craig Cooper and Jodie Beatty
This material represents an assessment of the market environment as of April 21, 2020, and is not intended to be a forecast of future events or a guarantee of future results. The information is based on data gathered from what we believe are reliable sources. It is not guaranteed by LPL Financial. as to the accuracy and is not intended to be used as the basis for any investment decisions. The information presented does not constitute a solicitation for the purchase or sale of any security and is not a recommendation of any kind. Please consult your LPL financial advisor before making financial decisions. (04/20)