There were hopes oil would recover.

Unfortunately, that may not happen any time soon.  For one, there’s still plenty of demand destruction.  With many of us forced to stay indoors thanks to the coronavirus, demand has dropped.  Worse, without demand, there’s now far too much supply.  In fact, the world is running out of places to store the excess.

Global oil storage could easily reach maximum capacity in just weeks.  “With demand collapsing but supply rising after OPEC and non-affiliated Russia failed to reach a production cut agreement in early March, global inventories could reach their maximum capacity within weeks,” analysts at Eurasia Group said, as quoted by CNBC.

With the coronavirus keep many of us at home, the supply/demand issue won’t improve any time soon.  At the same time, the price war between Russia and the Saudis isn’t helping.  While OPEC was expected to meet today, that’s been delayed.

All thanks to new tensions between the two warring nations.

Russia is blaming the Saudis for pulling out of an OPEC deal, for increasing production, and for offering oil price discounts.

The Saudis fired back saying Putin’s comments were “devoid of truth.”

“Now we have two issues,” said Helima Croft, head of global commodities research at RBC.  “After President Trump’s statement it seems rather unlikely any production commitment is forthcoming. And it looks like we might have a new diplomatic rift between Russia and the Saudis…The Saudi minister is pushing back furiously on the Russian minister’s assertion that the Saudis are targeting shale.”

At the moment, the best way to trade oil is from the short side with ETFs and ETNs such as:

  • DB Crude Oil Double Short ETN (DTO)
  • Pro Shares Ultra Short Bloomberg Crude Oil (SCO)
  • Velocity Shares 3x Inverse Crude Oil ETN (DWT)