May 6th, 2020 | 05:57 CEST
BP, Exxon, Shell, Saturn Oil & Gas - Crude oil up to USD 100 in May?
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:
Author
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.
Tag cloud
Shares cloud
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.
Risk notice
Apaton Finance GmbH offers editors, agencies and companies the opportunity to publish commentaries, interviews, summaries, news and etc. on news.financial. These contents serve information for readers and does not constitute a call to action or recommendations, neither explicitly nor implicitly. implicitly, they are to be understood as an assurance of possible price be understood. The contents do not replace individual professional investment advice and do not constitute an offer to sell the share(s) offer to sell the share(s) or other financial instrument(s) in question, nor is it an nor an invitation to buy or sell such.
The content is expressly not a financial analysis, but rather financial analysis, but rather journalistic or advertising texts. Readers or users who make investment decisions or carry out transactions on the basis decisions or transactions on the basis of the information provided here act completely at their own risk. There is no contractual relationship between between Apaton Finance GmbH and its readers or the users of its offers. users of its offers, as our information only refers to the company and not to the company, but not to the investment decision of the reader or user. or user.
The acquisition of financial instruments entails high risks that can lead to the total loss of the capital invested. The information published by Apaton Finance GmbH and its authors are based on careful research on careful research, nevertheless no liability for financial losses financial losses or a content guarantee for topicality, correctness, adequacy and completeness of the contents offered here. contents offered here. Please also note our Terms of use.
