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May 6th, 2020 | 05:57 CEST

BP, Exxon, Shell, Saturn Oil & Gas - Crude oil up to USD 100 in May?

  • Oil
Photo credits: pixabay.com

In recent weeks, even experienced investors have learned a lot about the oil market. When the price of WTI slipped into the red in April 2020, this was a first in the history of black gold. On the one hand, the oversupply of producers put pressure on prices, but speculators also caused the distortions. It was a dangerous mixture on the expiry date of the May contracts. In two weeks' time, the June contracts expire and the price development is eagerly awaited, but this time it can also go the other way.

time to read: 2 minutes | Author: Mario Hose
ISIN: CA80412L1076 , GB0007980591 , US30231G1022 , GB00B03MLX29

Table of contents:


    Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
    "[...] China's dominance is one of the reasons why we are so heavily involved in the tungsten market. Here, around 85% of production is in Chinese hands. [...]" Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG

    Full interview

     

    Speculators have gambled away

    Crude oil is traded on the futures market in units standardized in terms of quantity and quality. A barrel is equivalent to 159 litres and a lot is 1,000 barrels. The contracts are traded on commodity futures exchanges, such as NYMEX in the USA. The WTI grade stands for Western Texas Intermediate and is considered the standard for quality in physical delivery on the expiration date.

    Transportation and storage costs are incurred in connection with the delivery. When the May contracts expired on 21 April, there were simply no buyers and anyone who wanted to get rid of a long position not only gave away the oil, but had to pay around USD 38.00 on top of it.

    Shortage and short selling

    Market participants have had a painful experience that is unlikely to be repeated on May 19, when the June contracts expire. A long squeeze in April could possibly be followed by a short squeeze until the May expiry date. Due to the low oil price, it is not worthwhile for many producers to continue production at normal levels. A throttling leads to a decline in supply.

    At the same time, the economy and thus the demand for oil will continue to grow in the coming weeks. Speculators, who at the same time are betting that the oil price will be lower again at the expiry date, could possibly become the price driver with their coverages. Will the price of oil still rise to USD 100.00 per barrel in May? We will see. Most recently, the June contract for WTI was traded at USD 24.59 and has thus already risen by more than 100% compared to the previous week.

    Advantage for Canadian oil

    The shareholders of BP, Exxon and Shell will again have exciting days ahead of them. Up to the level at the beginning of the year, when the oil price was trading above USD 60.00, these shares will have to increase by 50%. A positive oil price development will also be exciting for the young producer Saturn Oil & Gas from Canada. The company produces the black gold in the province of Saskatchewan.

    The deposits are located in the Viking Formation, consisting of sandstone, and can be extracted at less than CAD 15 per barrel more cost-effectively than the shale oil produced by the companies in the USA. This competitive advantage is likely to play into Saturn Oil & Gas' hands in the future. Especially since the management is also focusing on the ESG trend.

    Harmless origin of the energy source

    Oil will continue to be needed in the future in modern and aspiring society. In this context, the current market conditions can be an excellent opportunity to enter the market. In connection with the topic of sustainability and environmental protection, Canada as a location is likely to gain in importance.

    Ethically and morally sound oil will have a competitive advantage in the medium to long term. Anyone who already places value on fair trade and organic farming should question which regime is supported at the fuel pump.


    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may in the future hold shares or other financial instruments of the mentioned companies or will bet on rising or falling on rising or falling prices and therefore a conflict of interest may arise in the future. conflict of interest may arise in the future. The Relevant Persons reserve the shares or other financial instruments of the company at any time (hereinafter referred to as the company at any time (hereinafter referred to as a "Transaction"). "Transaction"). Transactions may under certain circumstances influence the respective price of the shares or other financial instruments of the of the Company.

    Furthermore, Apaton Finance GmbH reserves the right to enter into future relationships with the company or with third parties in relation to reports on the company. with regard to reports on the company, which are published within the scope of the Apaton Finance GmbH as well as in the social media, on partner sites or in e-mails, on partner sites or in e-mails. The above references to existing conflicts of interest apply apply to all types and forms of publication used by Apaton Finance GmbH uses for publications on companies.

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    Der Autor

    Mario Hose

    Born and raised in Hannover, Lower Saxony follows social and economic developments around the globe. As a passionate entrepreneur and columnist he explains and compares the most diverse business models as well as markets for interested stock traders.

    About the author



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