{"id":1151,"date":"2020-11-12T14:29:23","date_gmt":"2020-11-12T14:29:23","guid":{"rendered":"https:\/\/campus.hesge.ch\/commodity-trading\/?p=1151"},"modified":"2020-11-12T14:29:23","modified_gmt":"2020-11-12T14:29:23","slug":"bulletin-1-north-american-crude-price-history-and-covid-19-impact","status":"publish","type":"post","link":"https:\/\/campus.hesge.ch\/commodity-trading\/bulletin-1-north-american-crude-price-history-and-covid-19-impact\/","title":{"rendered":"Bulletin 1: NORTH AMERICAN CRUDE PRICE HISTORY AND COVID-19 IMPACT"},"content":{"rendered":"\n

Price movement reca<\/strong>p<\/p>\n\n\n\n

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2014-2016 economic slow-down, and massive oversupply of oil by NON-OPEC countries essentially due to rising shale oil production by the US, combined with economic slow-down reducing demand for oil. Causing decrease in WTI spot price from USD105\/barrel to USD36\/barrel. [1]<\/em><\/p>\n\n\n\n

2020 Coronavirus recession: economic slow-down reducing transport, air-traffic, affecting directly the global demand for oil which caused the price to fall drastically and for the first time, WTI trading to negative USD37\/barrel. Agreement from OPEC+ to cut output by 10M barrels\/day, allowed a recovery to come back positive and more or less stabilizing the price oil.\u00a0[2]<\/em><\/p>\n\n\n\n

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Forward curve 9.11.20<\/u><\/strong><\/p>\n\n\n\n

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In this case the forward curve is in contango which means the\u00a0spot price for delivery now is lower than today\u2019s price for delivery in future.\u00a0In other words,\u00a0it means our market is relatively well supplied. Supply is greater than demand now,\u00a0<\/p>\n\n\n\n

In other words, today\u2019s future contract prices for delivery today is lower than prices for delivery in future.This can be explained by the fact that <\/strong>today\u2019s prices for future delivery include: Storage and finance cost.  <\/p>\n\n\n\n

The contango situation could be explained by the recent cut in oil production from OPEC+ and also the short\u00a0recovery of the economy by the expected announcement of a potential vaccine.\u00a0[2]<\/em><\/p>\n\n\n\n

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S<\/u><\/strong>upply and demand dynamic <\/u><\/strong>– <\/u><\/strong>Inventory levels<\/u><\/strong> [3]<\/em><\/u><\/strong><\/p>\n\n\n\n