While some energy plays look extremely risk, this may be a chance to pick up some serious bargains.
It was one of the most startling moments in a year that’s held no shortage of surprises. May crude oil futures fell as low as -$40.32 on April 20th, before rebounding to expire at $9.06 the following day.
The historic move into negative territory reflected the almost complete lack of short-term demand for oil, due to the decline in travel and other economic activity caused by the coronavirus pandemic. It pointed to the lack of storage capacity, which constrained the ability of long-term players to take advantage of de minimis prices. It may also have reflected some significant inter-office risk management failures within funds, perhaps exacerbated by the new workflows also caused by Covid-19. Small positions that were accidentally held too long simply had to be sold at any price, even if that price was sharply negative.