Since the Coronageddon we’ve all become armchair epidemiologists. On Tuesday night, as President Cyril Ramaphosa released his R500bn stimulus package, we were all economic experts – if Twitter is any indication. But most of all, this week we’re oil traders. Or we wanted to be.
A negative price for West Texas Intermediate? Brent crude at 16 bucks a barrel? Surely, you think, this is the steal of the century? Well, it has been for one of the world’s top oil traders, Pierre Andurand, about whom you can read about here. He has been shorting the stuff since the start of the year and he’s made a packet – not for the first time, either.
But to everyone else wondering whether they should dip a toe into one of the world’s most, er, liquid markets, take care: oil trading is not for greenhorns. For sheer complexity – contango and backwardation, anyone? – you need to read about the bewildering case of the United States Oil Fund (USO), the world’s biggest oil exchange traded fund, which traders say is responsible for “colossal mismatches” in the oil market. The take of the Financial Times (FT) on USO is here and trading website The Motley Fool has a few choice pointers here. It’s complicated, and that’s partly the point: thinking that you’re going to make a quick buck by buying a few barrels of your own oil and storing them at your cousin’s plot in Lanseria isn’t anywhere as obvious a trade as you’d like it to be.
Tread lightly, carry a big gun
I realise I’m naturally more bear than raging bull, but I’m clearly not alone.
If nothing else, the collapse in oil prices is telling us that we are not springing back to a normal post-Covid-19 world in a jiffy, and the FT’s markets writer, Katie Martin, makes a great argument for general caution in this piece.
That’s not to say there aren’t companies that won’t thrive in this time: last week we mentioned Netflix. They released results after the market close on Tuesday, and they were, in the words of Seinfeld’s fictional attorney, the immortal Jackie Chiles, spectacular.
Personally – as it becomes increasingly obvious that normality is a long way off, no matter how much we’d like to believe otherwise – I find myself curious about what life was like during and after the great 1918 flu pandemic. Recently I came upon this essay by John Barry, based on his book The Great Influenza, which was published by the Smithsonian, presciently you might now say, in 2017. Look at it as something to order for when the lockdown opens up. Or you can dispense with pre-Covid living entirely and download it on your Kindles. You’ll be using those for a while yet.
*Talevi is the FM’s Money & Investing editor
To subscribe, for free, to the FM's lockdown newsletter click here.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.