Commodity Trends

Bullish sentiment appears to have returned to the stock markets with a vengeance. In a historic rally that has taken even die-hard bulls by surprise, the S&P 500 has managed to claw back all of its 2020 losses, taking just 53 sessions for the index to fully restore the nearly $10T in value it shed in an epic bear market. The oil markets have been nearly as impressive.

Within a month, the U.S. oil benchmark West Texas Intermediate recorded two first-of-a-kind events. First, it fell below zero on April 20. Then, it soared up so quickly it is about to book its best month ever. Still, many analysts and other observers remain wary of any premature optimism. Bankruptcies in the U.S. shale patch are rising. Seventeen companies have already filed for Chapter 11 protection since the start of the year, the FT reported. Still, many more bankruptcies are on the way, with Rystad Energy estimating that as many as 73 shale drillers could be forced into bankruptcy by the end of the year.

April 20th, 2020, is a day that will go down in history. Not because of wars or even because of the Coronavirus but simply because it was the first day ever where oil prices were negative. Yes, they were actually paying to try to give it away. Last month we said, that Saudi Arabia’s Oil Price War Is Backfiring. They picked a very bad time to boost production in order to drive prices down just as the Coronavirus stalled the world economy and drove demand to historic lows. It appears that Monday’s price fall is the culmination of that disastrous decision.

Saudi Arabia and Russia must have known an oil price crash would result when they broke up their three-year-long bromance designed to push up oil prices.    Two weeks after the break-up and nearly 4 million bpd of total promised additional oil supply to the market next month, and Riyadh and Moscow are now counting the cost and trying to adjust government spending.