I’m writing this article on the morning of 21 April 2020 (Tuesday) in Singapore. On the night of 20 April 2020, the price of oil fell to negative territory. I’m referring specifically to contracts for deliveries of West Texas Intermediate (WTI) crude oil in early May.
Here are some quick thoughts I have on this development…
1. Scott Sagan, a professor of political science, once wrote that “things that have never happened before, happen all the time in history.” Last night was the first time ever that oil prices became negative. Historic and fascinating? Yes. Surprising? It shouldn’t be. Crazy things happen all the time in the world of finance.
2. I hope investors are not lured to invest in oil & gas stocks simply because the price of oil is now so low. There are two important things to note:
Predicting the future of oil prices is practically impossible....