Oil Price Turmoil Persists, But Analyst Says Storage Worries Are Short-Term

The crash in oil demand brought prices below zero for the first time in history Monday as storage for the commodity runs out, but this issue is a short-term one, according to one analyst.

WTI crude was trading 86.7% higher at the time of publication Tuesday but was still negative by $5.

“The drop in oil price reflects some ‘short term’ worries about storage,” Nadège Dufossé, deputy global head of multi-asset at Candriam, said in a note.

Dufossé said that while oil production cuts have been agreed to, they will not be sufficient come May and June given the freefall in demand and strong uptick in inventories. 

“For the oil price to rebound we would need higher production cuts from May 1, as well as better perspectives on demand increase that should follow the easing of lock down in various countries."

The drop in oil prices has in turn impacted currencies and equity markets, the analyst said. 

“With regards to the impact on the equity markets, this will be mostly felt within the energy sector. For bonds, the greatest impact will be felt within the U.S. high-yield space. We will also see negative ramifications on inflation and rates." 

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