Oil prices jumped 40% at the high on Wednesday, recovering from early losses in a volatile overnight trading session that saw international benchmark Brent crude fall to its lowest level in more than 20 years.
Given oil’s more than 70% decline this year a smaller gain, of course, now accounts for a much larger percentage move. At the beginning of the year WTI fetched more than $60 per barrel, but the fall-off in demand caused by the coronavirus pandemic has sent prices tumbling.
On Wednesday President Donald Trump said in a tweet that he had “instructed the United States Navy to shoot down and destroy any and all Iranian gunboats if they harass our ships at sea.” CNBC’s Jim Cramer said this could have contributed to oil’s surge higher as short sellers covered their positions.
I have instructed the United States Navy to shoot down and destroy any and all Iranian gunboats if they harass our ships at sea.
— Donald J. Trump (@realDonaldTrump) April 22, 2020
Wednesday’s move higher stood in sharp contrast to the wild downward price action in oil so far this week. On Monday, the WTI contract for May delivery plunged below zero to trade in negative territory for the first time in history.
MacDailyNews Take: The macroeconomic shockwaves from the COVID-19 pandemic shutdowns continue, as most observers expected, and as seen clearly in oil prices, but, demand will pick up a some point and things will smooth out. In the meantime, stay safe and healthy, everyone!
The short term story in the market remains oil. Yet, this is much bigger than oil. The price action over the last 48 hours not only points us back to the economy and demand side, but is showing signs of spillover and contagion in risk toward other markets. — Gregory Faranello, head of U.S. rates trading at AmeriVet Securities
This week investors are realizing that even though the crisis could soon get better, the negative impacts of having an economy which is essentially shut down are magnifying at an alarming rate. With no demand even for a couple of months, energy prices go negative as excess oil supplies balloon. — Jim Paulsen, chief investment strategist at the Leuthold Group