Please ensure Javascript is enabled for purposes of website accessibility

What Negative Oil Prices? Benchmark WTI Crude Soars 65% in Less Than 2 Days

By John Bromels – Apr 23, 2020 at 5:09PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Just 3 days after negative prices shocked the industry, WTI crude is up big.

Monday's historic price crash for U.S. benchmark WTI crude -- which hit negative $37.63/barrel -- sent shockwaves through the industry and across Wall Street. But it didn't last long: By Thursday morning, WTI crude prices had rebounded sharply, hitting an intraday high of $18.15/barrel. That was up 68.4% over Wednesday's opening price of $10.78/barrel.

U.S. oil stocks rose to varying degrees on the price rebound. Shares of oil driller Apache Corporation soared more than 12% in morning trading, while integrated oil major ExxonMobil saw a more modest 5% gain.

A smiling man stands next to a cloud of paper currency exploding from an oil drum.

Image source: Getty Images.

On a technicality

Monday's negative oil prices were mostly caused by a short-term oil storage crunch.

It's all a bit technical, but basically, Tuesday represented a deadline to find a place to store crude oil. However, thanks to the coronavirus-induced drop in demand, most storage was already full. So instead of selling their crude oil, investors had to pay almost $40/barrel to convince someone with storage to take it off their hands. 

By Wednesday, that deadline had passed, which is why prices are no longer negative. However, that doesn't explain the jump in prices from Wednesday to Thursday.

Possible reasons

Some analysts attributed the increased WTI crude prices to a belief among energy investors that this week's historically low prices will prompt further production cuts, leading ultimately to higher oil prices.

Others pointed to a Wednesday tweet by President Donald Trump that seemed to threaten Iran. Instability in the Middle East often leads to higher oil prices. A slight drop in initial U.S. jobless claims, reported Thursday, and optimism about a potential partial reopening of the U.S. economy may also have been factors. 

John Bromels owns shares of Apache. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/04/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.