Oil: Heightened volatility – Charles Schwab

The price of oil will continue to experience heightened volatility until supply and demand can be balanced, in the opinion of David Kastner from Charles Schwab.

Key quotes

“While oil companies are dealing with significant short-term inventory issue, energy company stocks are heavily influenced by the future price of oil, that is, one to two years out. Those prices are still positive, which helps explain why energy company stock prices did not fall by as much as one might have expected today.”

“With oil prices well below profitable levels, the impact of COVID-19 on energy companies is expected to be enormous, particularly for smaller exploration & production and oil services companies.” 

“In a recent Kansas City Federal Reserve Bank survey, nearly 40% of oil companies said they would be insolvent within a year if oil prices were to stay at or below $30 per barrel.”